What Are Policy Limits in a Personal Injury Case?

An insurance policy, whether for cars, homes, or commercial buildings, is simply a contract that assures the policyholder that if they are sued for causing injury or damage, the insurance company will pay up to a specified dollar amount to cover their liability. Without insurance, someone could go after a person’s assets—such as their house, cars, or bank accounts. For businesses, there is essentially no limit to what can be recovered, meaning a judgment could potentially require payment of every asset.

Policy limits define the maximum amount an insurance company will pay for a claim. In Texas, for example, state law requires all drivers to carry at least $30,000 in bodily injury liability coverage. This means if a driver injures someone, their insurance will pay up to $30,000 to cover the damages. Some individuals, especially those with significant assets such as multiple homes or vehicles, often choose higher insurance limits to protect their assets if they are sued. Common personal auto policies in Texas range from the state minimum of $30,000 to $50,000, $100,000, or even $250,000, with umbrella policies that can extend coverage to $500,000 or more.

Commercial vehicles and businesses typically carry much higher policy limits because they have more assets and fewer protections under the law. Certain large interstate vehicles are required to have at least $750,000 in coverage, and many commercial policies exceed $1 million to $5 million, often supplemented by umbrella policies.

Understanding policy limits in your personal injury case is critical because the policy limit is often the biggest factor in determining the maximum compensation you can recover. In Texas, personal property exemptions limit how much can be collected from an individual’s assets—typically $50,000 for a single person or $100,000 for families—while the homestead exemption provides unlimited protection for a primary residence. As a result, in many cases, the available insurance policy is the only realistic source of compensation, especially if the at-fault individual has limited assets.

Your own insurance policy may include underinsured motorist coverage, which can supplement the at-fault driver’s policy. An experienced attorney can evaluate all available insurance coverage, review the full economic value of your case, and work to maximize your compensation by identifying every possible source of recovery.