Liability Limits

What Does Liability Limits Mean?

Liability limits represent the maximum amount a liability insurance provider will pay for a single claim. If a claim exceeds this limit, the policyholder must cover the excess out of pocket or rely on additional liability coverage, such as an umbrella policy.

Insuranceopedia Explains Liability Limits

For example, if a policyholder accidentally rear-ends another car, their auto insurance policy with a combined single limit of $100,000 would cover any injuries to the other driver and damage to the vehicle, as long as the total amount is less than $100,000. Picking the right number is a judgment call based on your assets and what you can pay out of pocket, and our overview of how much liability insurance you need goes through the common benchmarks drivers weigh.

Businesses, particularly larger corporations, typically require much higher coverage due to the increased risks associated with running a business and having multiple employees. A common starting point for most small companies is a general liability insurance policy, which can be paired with a commercial umbrella insurance policy once the base limits run out. Liability insurance is crucial, as accidents or damage caused by defective products could result in significant financial consequences for the company.