[pending]

What if a company offered policies, at discounts, that had fixed caps on liability?

If lots of informed folks opted for them...?

Since i willingly accept the terms, would it stand up to a legal assault?

[pending]

Thuis seemed good for a moment.
Nothing to stop the other one from coming after me...
Doh.

[wildbill]

I'm not sure what you mean by a "policy with fixed caps on liability" as an answer to the problem. What you might be asking for is something like a deductible on your liability policy rather than a maximum cap.

Deductible liability policies work fine in theory--but are not very reliable in practice. For example, let's say you decide you can stand to pay the first $2,500 of a claim. That could lead to several types of disasters.

1. You would have to do all the negotiating about pain and suffering with little experience and try to settle it without legal safeguards.
2. You might prejudice the rights of the insurance company by inept or inexperienced actions or failure to investigate.
3. You might very well drive the claimant into the arms of an attorney, thus driving up the cost over the deductible at which time the insurance company would have to come in to pick up the pieces.

I don't know of any insurance company that is willing to write deductible liability insurance without an underlying base policy--especially for individuals.

To get back to your original question, in reality, all policies have fixed caps on liability now. It works in two ways. 1) In most states for example, you can buy an auto policy with state mandated "minimum limits" as the cap on the liability policy. These minimum limits are the state-determined public policy as the minimum protection necessary for the public-at-large.

2) However, you can also buy additional coverage with a higher maximum limit than the state mandated minimum. The higher limit caps the insurance company's potential payout. If a loss that you are obligated to pay goes over the limit you select, then you pay the balance.

Each individual makes the determination of how much protection he needs vs. the cost factor and then makes his decision based on the cost/benefit ratio.