What is a policy limits settlement?

A policy limits settlement is a type of settlement agreement that caps the amount of financial compensation that an insurance company will pay out to a claimant. It is common in cases where the claimant's damages or injuries exceed the limits of the insurance policy held by the at-fault party.

In a policy limits settlement, the insurance company agrees to pay out the maximum amount dictated by the policy, and the claimant agrees to release the insurance company and the at-fault party from any further liability related to the claim. This means that the claimant cannot pursue any additional compensation from the insurance company or at-fault party, even if their damages exceed the policy limits.

Policy limits settlements can be beneficial for both parties, as they provide a clear resolution to the claim and prevent lengthy and costly legal battles. However, claimants should be aware that accepting a policy limits settlement means they are agreeing to forgo any additional compensation, even if their damages are more extensive than initially thought. It is important for claimants to carefully consider their options and consult with a legal professional before accepting a policy limits settlement.