Statute of Limitations
Definition - What does Statute of Limitations mean?
A statute of limitations is a specified time period during which a policyholder can file a claim for damages. If they do not file a claim within this time period, their insurance policy will no longer pay for any damages.
This term is also used more broadly to refer to the time frame during which a lawsuit can be filed in response to a particular harmful event.
Insuranceopedia explains Statute of Limitations
Statutes of limitations exist because they make sure an incident can be investigated properly for a lawsuit or insurance claim. If a person waits too long to file, it becomes too hard to figure out what happened. For example, witnesses will forget about the event and evidence of the damage will be repaired, replaced, or just disappear.
In the case of a lawsuit, the statute of limitations for suing for damages after a car accident is around two to three years in most states. If a person in a car accident wants to sue another driver, they have to file their claim within the statute of limitations or else it won’t be possible and they’ll lose their right to sue.
It’s important for policyholders to be aware of the statute of limitations in their policies so they don’t miss out on a possible claim because they waited too long to file.