What is a Compulsory Limit?
A compulsory limit is the minimum insurance coverage that individuals are legally required to carry, particularly in relation to auto insurance. In many states and countries, governments set mandatory insurance limits to ensure drivers have basic protection in case of accidents or damage to property and people.
For example, most states in the U.S. require a compulsory liability insurance limit. This ensures drivers have enough coverage to compensate others if they are at fault in an accident. Compulsory limits typically include coverage for bodily injury and property damage, providing financial protection for both the insured and the injured parties.
In personal and business insurance, adhering to compulsory limits helps individuals and companies avoid legal penalties. For car owners, failing to meet these mandatory requirements can result in fines, license suspension, or higher insurance costs in the future. However, it’s often recommended to purchase coverage beyond the compulsory limit to ensure adequate protection in more severe accidents or claims.