What Are “Drop Down Limits” in an Insurance Policy?

What in the world are “drop down limits” in an insurance policy? They are a hidden way that insurance companies use to REDUCE coverage you have purchased. The effect is to reduce limits down to the minimum required by state law, even if you have purchased higher limits, when certain people are driving your motor vehicle. Like who? Some policies reduce the limits for anyone who is not a relative living in your household. So, your best friend. Your boss. Your adult child who is no longer living at home. So when your adult child visits, and drives your vehicle, your coverage (in North Dakota) is only $25,000 per person, $50,000 per accident, instead of the $100,000 per person/300,000 per accident (or even higher limits) you bought and paid for with your premium. How can you tell if your policy has “drop down limits?” The only sure way is to ask your agent, and if your agent doesn’t know, have the agent ask the company for you. Or have a lawyer experienced in handling insurance coverage cases read your policies to look for “legalese” that’s hidden in endorsements (add-ons to an insurance policy). Why can your insurance company do this? Because the Legislature said they can. If you want to change the law, you’ll have to ask the Legislature to do so. If you want an insurance policy without drop down limits, ask your agent to find you one, or change companies.