What is insurance policy limit?

An insurance policy limit is the maximum amount an insurance company will pay under a specific policy for a covered loss. This limit sets the ceiling on the insurer's financial responsibility — any damages beyond that threshold fall outside the policy's coverage, regardless of how severe the actual losses may be.

The information on this page is provided for educational purposes only and does not constitute legal advice. If you are wondering what a policy limit is in insurance and how it applies to your situation, schedule a free consultation with Kermani LLP.

Legal Definition of an Insurance Policy Limit

The policy limit insurance definition is straightforward: it is the dollar figure written into an insurance contract that caps the insurer's liability for each type of coverage. In auto insurance, separate limits apply to bodily injury and property damage.

Every state sets its own minimum auto insurance requirements. Georgia's minimums are defined under O.C.G.A. § 33-7-11:

• $25,000 for bodily injury per person
• $50,000 for bodily injury per accident
• $25,000 for property damage

These figures are expressed in the format 25/50/25. Many drivers carry only the state minimum — a coverage limit that rarely proves adequate when serious injuries are involved.

Per Occurrence and Aggregate Limits

Insurance policies use two primary types of limits to cap the maximum insurance payout.

A per-occurrence limit is the maximum the insurer will pay for a single incident. A policy with a $1,000,000 per occurrence limit covers up to that amount for one event, no matter how many people are injured.

An aggregate limit caps total payouts across the entire coverage period, typically one year. Once the aggregate is exhausted, coverage stops until the policy renews — even if claims remain outstanding.

Standard personal auto policies use per occurrence limits. Aggregate limits are more common in commercial policies and general liability coverage, which often come into play in cases involving trucks and commercial vehicles. Both cap what the insurer will pay, but they apply across different time horizons. A separate structure — the claims-made policy — covers only claims reported during the active term of the policy.

Understanding Split Limits vs. Combined Single Limits

Auto insurance coverage can be structured in two formats.

Split limits are expressed as three numbers separated by slashes — for example, 100/300/100. Each number represents a separate cap:

• First — maximum per person for bodily injury
• Second — maximum per accident for bodily injury
• Third — maximum per accident for property damage

Here is what that looks like in practice: two people are injured in a crash, each with $40,000 in medical expenses. Under a 25/50/25 policy, neither can receive more than $25,000. The remaining $15,000 per person goes uncovered.

A combined single limit (CSL) pools all policy coverage into one amount that applies across both bodily injury and property damage. A $300,000 CSL policy offers more flexibility — if property damage is minimal, the bulk of the limit can go toward covering injuries.

Consequences of Exceeding Insurance Policy Limits

When actual damages exceed the at-fault driver's policy limit, the injured party is not confined to a single source of recovery. Several paths exist for closing the gap:

• UM/UIM coverage (uninsured/underinsured motorist) draws on the injured party's own policy to cover the difference between the at-fault driver's limit and the actual damages.
• A personal lawsuit against the at-fault driver allows recovery against the defendant's personal assets when insurance falls short.
• Third-party liability may apply when the driver's employer, the vehicle owner, or a product manufacturer bears additional responsibility. Corporate policies typically carry significantly higher limits.

Umbrella or excess coverage can also provide an additional layer of protection beyond standard policy limits, bridging the gap when primary coverage runs out.

Under O.C.G.A. § 33-3-28, an insurer must disclose policy limit information within 60 days of a written request. Knowing the claims limit early gives an attorney insight into every available source of coverage and shapes the strategy for the entire case.

Talk to an Attorney About Your Coverage Options

If you have been injured in an accident and believe the at-fault driver's policy limit will not cover your losses, an experienced personal injury attorney can identify every available source of compensation. Kermani LLP offers free case evaluations — schedule a consultation to discuss your situation.