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How Policy Limits Affect Personal Injury Claims in 2025
When you’ve been injured in an accident, your focus should be on recovery, not worrying about whether the at-fault party’s insurance will cover your losses. Unfortunately, one of the most important and most overlooked factors that can affect your personal injury compensation is insurance policy limits.
In 2025, insurance law continues to evolve, but one thing remains consistent: the limits on an insurance policy can significantly impact your ability to recover full compensation for your injuries, medical expenses, lost wages, and other damages.
Let’s break down how policy limits work, how they affect personal injury claims, and what you can do if your damages exceed what an insurance company is willing or legally obligated to pay.
What Are Insurance Policy Limits?
An insurance policy limit is the maximum amount an insurance company agrees to pay under a policy for a covered claim. Policy limits determine how much the insurance company will pay, not necessarily how much you are owed. These limits are often broken down into categories, such as:
- Bodily Injury Liability per Person (e.g., $250,000)
- Bodily Injury Liability per Accident (e.g., $500,000)
- Property Damage Liability (e.g., $100,000)
These example numbers define the ceiling of what the insurer is contractually obligated to pay. Once that limit is reached, the insurance company is no longer required to cover additional damages, unless certain legal conditions are met.
How Policy Limits Apply in Personal Injury Cases
In a typical personal injury case, the liable party's insurance is expected to cover your damages. But here’s where things get tricky: if your damages exceed the policy’s limits, you may be left with a shortfall unless additional legal actions are taken.
Here's what can happen:
- You’re in a car accident, and your medical bills total $750,000.
- The at-fault driver only has a policy limit of $500,000.
- That leaves $250,000 of uncovered damages.
This leads us to understanding excess judgments.
Excess Judgments: When Damages Exceed Policy Limits
When it's clear that your damages exceed the policy limits, your attorney may pursue an excess judgment.
An excess judgment is a court award that goes beyond the at-fault party’s insurance policy limits. For example:
- The insurance company offers the policy limit of $500,000.
- Your attorney argues that the damages are clearly worth $750,000.
- The court awards a $750,000 judgment.
- That additional $250,000 becomes the responsibility of the at-fault individual unless legal strategies are used to compel the insurance company to pay more.
In some cases, the insurance company may agree to pay more outside the policy limits if it’s clear they acted improperly by refusing to settle a claim they should have. That’s where bad faith insurance claims come in.
Understanding Bad Faith Insurance Claims
Insurers have a duty to act in good faith when handling claims. This means:
- Investigating the claim thoroughly
- Offering fair settlements when liability is clear
- Not dragging their feet unnecessarily
When an insurer unreasonably denies or delays a valid claim or refuses to settle within limits when they should, your attorney may pursue a bad faith claim.
If your lawyer can prove bad faith, the insurance company can be held liable for the full amount of the judgment, even if it exceeds the policy limits. This puts pressure on insurers to act fairly and encourages early settlement in high-damage cases.
Examples of Policy Limits in Personal Injury Cases
Understanding how policy limits apply in real-life cases can help you see why legal representation matters, especially when damages exceed what insurance will pay. Here are three examples showing different outcomes:
Example 1: Insurance Pays Beyond Policy Limits
A pedestrian was hit by a commercial truck and suffered severe injuries, resulting in over $1.2 million in damages. The truck driver’s policy maxed out at $500,000. However, the victim’s attorney presented clear evidence of the injuries and long-term impact. To avoid a bad faith lawsuit, the insurer agreed to settle for the full $1.2 million, well above the policy limit.
This case shows that with strong legal pressure and clear liability, insurers may settle for more than the policy technically requires.
Example 2: Insurance Refuses to Pay Beyond Limits
In a rear-end collision, the victim required surgery and incurred about $300,000 in total damages. The at-fault driver’s insurance policy only covered $100,000. Without an attorney, the victim accepted the policy limit and had no leverage to pursue the remaining $200,000.
This example highlights what can happen when claims are handled without legal support, once the insurer hits the limit, they often walk away.
Example 3: Bad Faith Claim Leads to Full Compensation
A speeding driver caused a multi-car crash that injured a family of four. Damages totaled nearly $1 million, but the insurance policy covered only $500,000. Despite clear evidence, the insurer refused to settle. At trial, the jury awarded $1 million. The family’s attorney then filed a bad faith claim, and the insurer was ordered to pay the full judgment plus penalties.
This scenario shows how insurers can be held accountable when they refuse to act fairly and how legal action can recover more than just the policy limit.
When Should You Get an Attorney Involved?
The best time to involve an attorney in your personal injury case is as soon as possible, ideally, immediately after the incident occurs. Waiting too long can jeopardize your claim and limit your ability to recover the full compensation you're entitled to. Insurance companies begin their defense strategy from day one, and without legal representation, you may unknowingly make mistakes that weaken your case.
An experienced personal injury attorney understands how to navigate complex issues like policy limits, liability disputes, and insurance negotiations. They know how to assess the real value of your damages, not just medical bills, but also lost income, emotional distress, and future care needs. More importantly, they can determine whether your case involves damages that exceed the policy limits and advise you on whether an excess judgment or bad faith claim is appropriate.
When you're represented by a skilled personal injury attorney, insurance companies are far more likely to take your claim seriously. Legal pressure compels them to act in good faith and often leads to higher settlement offers than what an unrepresented individual might receive.
Don’t Let Insurance Policy Limits Limit Your Future
Insurance policy limits can be a deterrent between you and the compensation you need, but that doesn’t mean all hope is lost. With an experienced legal team on your side, you can push back when insurance companies try to underpay or deny legitimate claims.
At Wettermark Keith, we know the tricks insurers use and we know how to fight them. Our attorneys have helped thousands of injury victims recover compensation beyond policy limits, through strategic negotiations, legal motions, and, when necessary, taking the fight to court.
If you’ve been wrongfully injured, contact our team at Wettermark Keith today. We’ll get your case started with a free consultation and help you maximize your compensation.
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