What Happens When Insurance Policy Limits Are Too Low?

A doctor holding cash and a medication bottle, illustrating the financial burden of medical expenses.

When the available insurance policy limits after an accident are lower than the victim’s damages, the at-fault driver’s insurer generally will not pay more than the applicable liability limit.

Kentucky victims may have other recovery options, including an underinsured motorist claim, claims against additional liable parties, or an excess damages lawsuit against the at-fault party.

Key Takeaways

The at-fault driver’s policy limit is not the same as the value of your claim, and Kentucky underinsured motorist (UIM) coverage can provide an additional source of recovery.
Employers, vehicle owners, commercial businesses, manufacturers and other negligent parties may have separate liability and insurance, and the at-fault person’s own assets may also be reachable.
Do not settle before you understand how a release could affect UIM coverage and other claims, because Kentucky law has specific rules for settlements with underinsured drivers.

When an Insurance Policy Does Not Cover the Full Loss

A serious car accident can generate medical bills, lost income, rehabilitation costs, and other losses that quickly exceed the amount of liability insurance available.

This problem is especially important in Kentucky. Under KRS 304.39-110, Kentucky’s minimum motor vehicle liability coverage is generally $25,000 for bodily injury to one person, $50,000 for bodily injury to all people injured in one accident, and $25,000 for property damage. A policy can alternatively provide at least $60,000 in single-limit liability coverage.

Those amounts may satisfy Kentucky’s insurance requirements, but they can be inadequate after a catastrophic injury. The Kentucky Department of Insurance itself advises consumers that minimum liability coverage may not be enough to protect against a substantial claim.

Reaching the at-fault driver’s policy limit does not necessarily mean an injured person has reached the end of the case. Other insurance coverage, defendants, and assets may need to be investigated before deciding how much compensation is realistically available.

An attorney can review the applicable policies and accident circumstances to identify potential sources of recovery before a victim accepts a settlement that may resolve important legal rights.

What Does an Insurance Policy Limit Mean?

An insurance policy limit is the maximum amount of coverage available under a particular part of an insurance policy for a covered claim, subject to the policy terms and applicable law.

Liability policies commonly distinguish between per-person and per-accident limits.

Under Kentucky’s current minimum split-limit requirements, for example, a policy providing 25/50/25 coverage provides at least:

$25,000 for bodily injury sustained by one person
$50,000 for bodily injuries sustained by all people in one accident
$25,000 for property damage in one accident

The distinction between per-person and per-accident limits can become critical when several people are seriously injured.

If three people suffer substantial injuries in the same collision, the available bodily injury coverage may need to address multiple claims within the overall per-accident limit. The fact that each victim’s damages exceed the amount received does not automatically increase the policy’s contractual limit.

What Is an Underinsured Motorist Claim in Kentucky?

Underinsured motorist, or UIM, coverage is designed to address situations in which an at-fault driver’s liability coverage is insufficient to fully compensate an injured person.

KRS 304.39-320 requires insurers to make underinsured motorist coverage available upon request. The statute describes UIM coverage as protection for an insured person who is legally entitled to recover damages from the owner or operator of an underinsured motor vehicle.

In practical terms, an underinsured motorist claim may become relevant when the victim’s legally recoverable damages exceed the amount available from the responsible driver’s liability coverage.

UIM coverage is different from uninsured motorist coverage. Kentucky addresses uninsured vehicle coverage separately under KRS 304.20-020. Uninsured motorist coverage generally concerns situations involving a driver without applicable liability insurance, while UIM coverage concerns an at-fault driver who has coverage that is inadequate relative to the damages.

UIM Coverage Is Not Automatic in Every Kentucky Policy

Victims should not assume they have underinsured motorist coverage simply because they have automobile insurance.

KRS 304.39-320 requires insurers to make UIM coverage available upon request. Whether coverage exists, how much is available, and which individuals qualify as insureds require review of the actual policy.

A lawyer investigating a serious accident may therefore examine all potentially applicable policies rather than relying only on the declarations page of the at-fault driver’s insurance.

How Does a Kentucky UIM Claim Work After a Settlement?

Kentucky law specifically addresses the relationship between UIM claims and settlements with underinsured drivers.

KRS 304.39-320 provides procedures allowing an injured person to preserve an underinsured motorist claim when a tentative settlement has been reached with the at-fault party and the liability insurer.

The UIM insurer must receive notice of the proposed settlement as required by the statute. The insurer then has statutory options concerning preservation of its subrogation rights.

These rules matter because settling with the at-fault driver without considering UIM requirements can affect additional recovery.

The statute was also amended in 2024 to address how credits are calculated when liability limits are distributed among multiple injured people. When full liability limits are paid to multiple injured persons through a reasonable pro rata settlement based on their total damages, the UIM insurer’s statutory credit for the liability coverage is limited as provided by KRS 304.39-320.

For accident victims, the practical takeaway is important: do not assume that accepting a liability-limit offer is merely an administrative step. The settlement should be evaluated alongside any potential UIM coverage before a release is signed.

Can You Sue the At-Fault Driver for Damages Above the Policy Limit?

Potentially.

A liability policy limit generally defines how much the insurer has agreed to pay for a covered claim. It does not necessarily define the maximum amount of damages for which the negligent person may be legally responsible.

If a victim proves damages exceeding the available liability coverage, an excess damages lawsuit may seek to hold the responsible party personally liable for the remaining amount.

Whether pursuing personal assets is practical is a separate question.

An attorney may investigate whether the defendant has income, real property, business interests, or other assets that could potentially satisfy a judgment. Collection rules, exemptions, liens, and other legal considerations can affect whether an excess judgment has meaningful value.

For that reason, the existence of damages above policy limits does not automatically mean litigation against an individual defendant’s personal assets is the most effective recovery strategy.

Could Another Party Be Responsible for the Accident?

Yes. One of the most important steps in a serious injury investigation is determining whether the immediately obvious defendant is the only responsible party.

Additional liability can significantly change the available sources of compensation.

Employers

If a negligent driver was acting within the scope of employment, an employer may potentially bear responsibility under applicable legal principles.

Commercial crashes may also require investigation of whether the company itself contributed to the accident through its hiring, training, supervision, vehicle maintenance, or other conduct.

Commercial Vehicle Companies

Truck accidents can involve several businesses.

Depending on the evidence, potentially responsible parties may include:

A motor carrier
Vehicle owners
Maintenance contractors
Cargo-loading companies
Other entities involved in commercial transportation

Each party’s role should be established through evidence rather than assumed.

Vehicle and Product Manufacturers

A defective vehicle, tire, component, or safety system may sometimes contribute to an accident or make resulting injuries more severe.

When the evidence supports a product-related claim, additional companies and insurance coverage may become relevant.

Other Negligent Drivers

Multi-vehicle crashes may involve negligence by more than one driver. Investigating the full sequence of events can identify additional parties whose conduct contributed to the injuries.

What If Several People Are Injured and Share the Same Policy Limit?

Multiple-victim crashes can make inadequate policy limits particularly complicated.

A policy’s per-accident bodily injury limit applies to the combined claims covered by that limit. When several people suffer serious injuries, the available liability coverage may be insufficient to fully compensate everyone.

This issue is expressly relevant to Kentucky’s UIM statute. KRS 304.39-320 addresses situations in which the full liability limits of an underinsured motorist are paid to multiple injured people, including a personal representative in the event of death, through a reasonable settlement based on a pro rata distribution in proportion to the victims’ total damages.

Victims involved in a multi-claimant accident should therefore avoid assuming that the at-fault driver’s stated policy limit will be available exclusively for their individual claim.

What Damages Can Exceed Auto Insurance Limits?

Severe injuries can create losses far above minimum liability limits.

Depending on the case, legally recoverable damages may include:

Past medical expenses
Future medical treatment
Rehabilitation expenses
Lost wages
Reduced future earning capacity
Pain and suffering
Permanent impairment
Other qualifying economic and non-economic losses

Catastrophic injuries such as traumatic brain injuries, spinal cord damage, amputations, and serious burns can involve lifelong treatment and reduced earning capacity.

Establishing the full value of these losses is important before evaluating whether available liability coverage is adequate.

Accepting a policy-limit settlement without understanding future damages can create significant problems if the settlement requires releasing the responsible party from further liability.

What Other Insurance Coverage Could Apply?

A complete coverage investigation may extend beyond the at-fault driver’s primary liability policy.

Depending on the circumstances, an attorney may examine:

The injured person’s UIM coverage
Other automobile policies under which the victim may qualify as an insured
Commercial automobile policies
Employer liability coverage
Umbrella or excess liability policies
Policies covering additional responsible businesses or individuals

The existence of a policy does not automatically mean it covers a particular accident. Coverage depends on the policy language, identity of the insureds, circumstances of the accident, exclusions, and applicable Kentucky law.

The purpose of the investigation is to determine which sources are legally available, not simply to identify every policy associated with someone involved.

What Should You Do Before Accepting a Policy-Limit Settlement?

A policy-limit offer can sound like the maximum possible recovery when it is presented as the most the insurer will pay.

That statement may be accurate concerning the insurer’s liability coverage, but it does not necessarily answer whether other compensation is available.

Before accepting an offer, injured victims should consider whether:

Their total damages have been adequately documented
Future medical needs are known
Lost earning capacity has been evaluated
UIM coverage applies
Other defendants may share liability
Commercial or excess insurance exists
The responsible party has recoverable assets
The proposed release could affect additional claims

Settlement agreements can extinguish important rights. Once a claim is fully released, reopening it can be extremely difficult or impossible.

This is why evaluating all potential recovery sources before signing a release is particularly important when damages exceed the apparent insurance policy limits after an accident.

How Long Do You Have to Pursue a Kentucky Motor Vehicle Claim?

Kentucky motor vehicle accident deadlines can differ from general personal injury deadlines.

KRS 304.39-230 provides that an action for tort liability not abolished by Kentucky’s Motor Vehicle Reparations Act may generally be commenced no later than two years after the injury, death, or issuance of the last qualifying basic or added reparation payment, whichever occurs later.

The statute contains additional provisions governing different types of reparation benefit claims.

Because filing deadlines depend on the type of claim and the specific facts, victims should not rely on a general limitations statement when deciding how much time remains.

UIM claims can also involve contractual and statutory requirements that should be evaluated separately.

Frequently Asked Questions

What happens if my medical bills exceed the other driver’s policy limits?

The liability insurer generally will not pay more than the applicable policy limit for a covered claim. However, you may have other options, including UIM coverage, claims against additional responsible parties, or recovery against the at-fault person’s assets.

Is underinsured motorist coverage required in Kentucky?

Kentucky law requires insurers to make UIM coverage available upon request under KRS 304.39-320. Victims should review their actual policies to determine whether UIM coverage was purchased and what limits apply.

What is the difference between uninsured and underinsured motorist coverage?

Uninsured motorist coverage generally applies when the responsible driver lacks applicable liability insurance or in other circumstances defined by Kentucky law and the policy. Underinsured motorist coverage can apply when liability insurance exists but is inadequate to cover the insured person’s legally recoverable damages.

Can I collect both the at-fault driver’s insurance and UIM benefits?

Potentially, subject to Kentucky law and the applicable policy. KRS 304.39-320 specifically addresses UIM recovery and the effect of settlements with an underinsured motorist. The amount recoverable depends on damages, available coverage, credits or offsets authorized by law, and policy terms.

Can I sue someone personally after their insurer pays the policy limit?

Potentially. An insurer’s policy limit does not necessarily eliminate the at-fault person’s liability for damages exceeding that coverage. Whether pursuing an excess judgment is practical depends partly on the defendant’s assets and other circumstances.

What if several people are competing for the same insurance policy?

The per-accident policy limit may have to address multiple injury claims. Kentucky’s UIM statute specifically addresses certain situations involving the distribution of an underinsured motorist’s liability limits among multiple injured people.

Should I accept an offer for the full policy limit?

A full-limit offer may be appropriate in some cases, but it should be evaluated in the context of the entire claim. Before signing a release, consider whether UIM coverage, additional defendants, excess policies, or other recovery sources may exist.