How Often Do Auto Accident Settlements Exceed The Policy Limits?

Car accidents can be a scary and confusing situation to find yourself in. Especially when it comes to filing claims for damages.

Today we’re looking at how often car accidents exceed policy limits, and exactly what this legal jargon means. 

How Often Do Auto Accident Settlements Exceed the Policy Limits

What is an Auto Accident Settlement?

But before we get into answering the question, ‘How often do Auto Accidents Exceed the Policy Limits?’, we must clear up some of the legal jargon surrounding this. First, let’s establish exactly what an auto accident settlement is.

A settlement is an agreement of a certain sum of money that will be paid out to the injured party in a situation where injury or damage has occurred to that person or their belongings.

In the case of an auto accident settlement, this is a sum of money that will be paid out to the injured party in a car accident. 

An auto accident settlement is called a ‘settlement’ because it usually brings the end to a case. The settlement is reached once all the required research has been completed by both parties, and after ‘fault’ has been determined.

For a settlement to be reached, one of the people involved in the accident must file a claim against the other driver’s insurance policy. They may also file an additional personal injury suit if the person’s insurance doesn’t cover what they believe they are owed financially.

For a settlement to be reached, it must be determined that the other driver completed unsafe or inappropriate driving actions which were the direct cause of the car accident in which the other party was injured. 

What is meant by ‘Policy Limits’?

Now that we’ve established what that term means, let’s also take a look at what is meant by ‘policy limits’. It is a term that is thrown about regularly when discussing any type of insurance, so we must establish exactly what it means concerning auto accidents. 

If you own a car and are legally allowed to drive it, you will have bought car or driving insurance to protect you while you drive. Car insurance is something that a lot of people will pay for but never have to put a claim in for.

However, you legally need to have car insurance to be able to drive your car on any public road. When you look at different car insurance policies, you will notice that there are lots of different types that come with different types of cover.

You can get basic car insurance policies, and you can get more complex policies that will cover you for lots of different things that could occur in a car accident. 

You have lots of different options when buying car insurance, you can get cheaper basic policies which will be cheaper. Alternatively, you could get a more expensive policy which will probably offer more protection in the unfortunate event that you end up in an accident.

No matter how basic or complex the policy that you buy, it will come with ‘limits’. These policy limits are usually the maximum amount that your insurance company will payout for each part of your insurance, from personal injury to property damages. 

How much can Someone Sue for an Auto Accident?

In the event of a car accident involving two vehicles, one or both parties will claim off of the opposite insurance. This happens in most States, apart from ‘no-fault’ States where both individuals must put a claim in against their insurance, even if they believe the accident was not their fault.

However, the majority of States have ‘fault’ laws that allow drivers to claim against the insurance policy of the driver they believe to be to blame for the accident.

Once a claim is made against a driver’s policy, the insurance company then completes research to try and determine who was at fault for the accident in question. In this process, they will talk to witnesses of the accident, assess medical reports, and possibly consult the police incident report that was made following the accident. 

Once the research is completed, the insurance company will make a verdict on which driver was responsible for the accident. In some cases, such as a vehicle driving into the back of a stationary vehicle which is stopped at a red light, determining fault is easy but in others, it can be a lot more difficult.

Due to the complexity of trying to determine ‘fault’, it can sometimes take weeks or even months for an insurance company to come to a decision. It is only once they have made the decision that your policy limits become important. 

If you have been involved in a car accident and your insurance company has concluded that it was your fault, the other individual will receive a payout against your policy.

Your car insurance company will determine a breakdown of what the other individual deserves in damages, and this will be paid out against your policy causing your premium to increase the following year.

However, your insurance company will only payout to the level that your insurance covers, so if you are insured up to $5000 in damages, this is the maximum amount that the company will payout.

In a lot of cases, this will not be an issue, however, if the other driver had a brand new car, and the crash wrecked it, the cost of damages might exceed what you are insured for. 

How often do Auto Accident Settlements Exceed the Policy Limits?

In most cases, the settlement cost will not exceed the policy limits of your insurance. This is because the majority of road traffic accidents are fairly minor, and damages are not too costly.

However, if you are unlucky enough to be involved in a major car accident, there is a fair chance that the costs may exceed your policy limits. Especially if the other driver was injured and is claiming personal injury as well as damages.

If your policy does not cover the cost of damages, you may find yourself at risk of being sued for the rest of the money that you owe. This is why you must choose a reputable company and a good insurance package to insure your vehicle. 


In short, the majority of car accidents will fall within the policy limits, however, in larger car accidents your policy limit may likely be exceeded.

To avoid this, you should invest in a good insurance policy when you buy your car. 


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