Glossary

Policy limits demand

An injured person's offer to settle for the at-fault driver's full liability limit by a deadline; mishandling it can expose the insurer to bad faith.

Also called: time-limited demand, limits demand, policy limits offer

A policy limits demand is a settlement offer from an injured person, usually through an attorney, to the at-fault driver's insurer: pay the full policy limit and the claimant will release the insured from further liability. It is typically sent in a demand letter with medical records and a deadline, which is why it is often called a time-limited demand.

The demand puts the insurer in a tight spot. Courts in most states recognize an insurer's duty to protect its policyholder from a judgment above the limits. If the insurer unreasonably rejects a fair demand within limits, or lets it expire, and a jury later awards more, the insurer can face a bad faith claim and may have to pay the whole judgment. Example: an insurer turns down a $100,000 limits demand on a serious injury claim, and a jury awards $600,000. The insured is exposed to the extra $500,000, which might be recovered from the insurer (hypothetical figures).

States regulate these demands differently. Georgia sets content and timing requirements by statute, and Florida's 2023 reforms gave insurers a 90-day safe harbor to tender limits. If you are the insured and learn of a limits demand, stay in touch with your insurer and consider a licensed attorney. See insurance bad faith explained.

Last reviewed October 4, 2026

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Related terms

Bad faith An insurer's unreasonable handling of a claim, such as denying, delaying or underpaying without a proper basis, which can expose it to damages. Demand letter A written request to an at-fault driver's insurer that sets out your injuries and losses and asks for a specific settlement amount. Liability limits The most a liability policy will pay for injuries and property damage you cause, usually written as three numbers such as 100/300/100. Release of liability A document an injured person signs to accept a settlement and give up further claims against the at-fault party for that accident. Policy limit The most an insurer will pay for a covered loss under a coverage, stated per person, per accident or per vehicle on your declarations page. Nuclear verdict A jury award far larger than the proven economic losses would suggest, most often defined as one over $10 million.

Related guides

Insurance bad faith explained What counts as insurer bad faith, how first-party and third-party claims differ, the state laws behind them, and what to do if your claim is mishandled. How much liability coverage do you need? A practical method for choosing car insurance liability limits based on what you own, what you earn and what extra coverage actually costs you. Social inflation and nuclear verdicts: how lawsuits raise premiums Social inflation is the rise in claim costs from litigation, attorney involvement and big jury awards. What the data shows and how it reaches your premium.