What is a statutory limit in an insurance policy?
A statutory limit in an insurance policy is a maximum amount of financial protection that is mandated by the state of Tennessee. It is calculated based on the amount of coverage an individual has purchased. For instance, if someone buys a car insurance policy in Tennessee, the statutory limit for any single accident or claim is $25,000. This means that any claims or costs related to the accident or claim cannot exceed $25,000 or the insurer is not liable to pay for these excess costs. The statutory limit is important because it prevents an insurer from being liable for amounts in excess of the policy limit, which could lead to costly lawsuits or other issues for the insurer. Additionally, it ensures that individuals are not paying for coverage that they may not need because they are limited to the amount of protection stated in the policy. In Tennessee, most policies have a statutory limit of $25,000, but it is possible to increase the limit if desired. For instance, an individual may choose to purchase a policy with a statutory limit of $50,000 or more. These increased limits come with increased premiums, however. In summary, a statutory limit in an insurance policy is the maximum amount of financial protection an individual is entitled to under their policy in the state of Tennessee. It is important because it prevents insurers from being liable for amounts in excess of the policy limit and helps individuals purchase only the coverage that they need.
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