When you’re injured in an accident caused by someone else’s negligence, you may face economic losses (e.g., medical bills and lost wages), and non-economic damages (e.g., pain and suffering). While calculating medical expenses is straightforward, determining compensation for your physical pain, emotional distress, and diminished quality of life becomes more complex, especially when insurance policy limits come into play.
Insurance policy limits can dramatically impact the compensation my clients receive for their pain and suffering. Understanding these limits is crucial for anyone navigating a personal injury claim in Illinois.
What Are Policy Limits?
Policy limits refer to the maximum amount an insurance company will pay for damages under a liability insurance policy. In Illinois, every driver must carry minimum liability insurance of $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $20,000 per accident for property damage — commonly referred to as 25/50/20 coverage. The bodily injury portion of this coverage must compensate for both economic damages (medical bills and lost wages) and non-economic damages (pain and suffering, emotional distress, and loss of enjoyment of life).
Here’s where the problem lies: if you suffer serious injuries requiring $20,000 in medical treatment from an accident caused by someone with minimum coverage, you might only end up with a few thousand dollars after medical bills are repaid and your attorneys’ fees are deducted.
Beyond the Limit: What to Know About Policy Limits Demand Letters
A policy limit demand letter is a strategic tool your attorney will use when the available insurance coverage clearly falls short of adequately compensating your damages. This formal demand requests the insurance company pay their full policy limits to settle the claim.
Typically, policy limit demands are made when:
- Medical expenses and lost wages alone approach or exceed policy limits
- The client has suffered severe, permanent injuries
- The pain and suffering damages obviously exceed available coverage
- Clear liability exists against the insured party
A policy limits letter has a major strategic advantage: The insurance company has a limited time to respond to policy limit demands. If they reject the demand and the case goes to trial, they run the risk of facing bad-faith liability and owing damages beyond their policy limits.
The bad-faith rule punishes insurance companies for trying to avoid paying out what the plaintiff is rightfully owed.
Basically, they are far more likely to pay the maximum limit than go to trial and risk paying even more, making a policy limit demand letter a critical tool at your attorney’s disposal.
How Policy Limits Affect Personal Injury Cases
Insurance policy limits can impact recovery options. Keep in mind there are no separate limits for economic damages (like medical bills and lost wages) and non-economic damages (like pain and suffering) in Illinois. The policy limit is the policy limit: one total amount covering all bodily injury damages.
When Policy Limits Fall Short
When an at-fault driver’s insurance limits are insufficient to cover your damages, several options may be available:
- Pursuing the at-fault driver’s personal assets
- Using your own underinsured motorist coverage
- Identifying additional liable parties with insurance coverage
Protecting Yourself from Inadequate Coverage
Unfortunately, many Illinois drivers carry only minimum insurance coverage, leaving accident victims undercompensated. Here are steps to protect yourself:
Purchase Adequate Coverage: Consider liability limits of at least $100,000 per person and $300,000 per accident. Higher limits provide better protection if you cause an accident.
Add Uninsured/Underinsured Motorist Coverage: This coverage protects you when at-fault drivers lack adequate insurance. In Illinois, insurance companies must include this coverage, though you can decline it in writing. You should never decline this coverage because it will only hurt you in terms of what you can recover.
Consider Umbrella Policies: These provide additional liability coverage beyond your standard auto and homeowners policies, typically starting at $1 million. These policies are generally cheap to purchase and provide great protection for you. However, you MUST tell the insurance company to include UM/UIM coverage in the umbrella policy. THIS IS CRUCIAL. Read more about the importance of Umbrella Policies.
Working with an Experienced Personal Injury Attorney
Navigating pain and suffering policy limits requires legal expertise. Insurance companies know most accident victims don’t understand policy limit implications and may offer quick settlements that inadequately compensate for long-term suffering.
I work closely with my clients to accurately document their pain and suffering through medical records, expert testimony, and personal accounts. When policy limits are insufficient, I explore all available insurance coverage and consider pursuing the at-fault party’s personal assets when appropriate.
Every case is unique, and the value of your pain and suffering depends on numerous factors, including injury severity, treatment duration, impact on daily activities, and long-term prognosis.
Schedule a free consultation today to find out how we can recover damages from your incident today.
