Limit Of Liability
What Does Limit Of Liability Mean?
A limit of liability is the maximum amount an insurance company will pay a policyholder in the event of a lawsuit. The specific amount is detailed in the policy terms. If the policyholder is sued and the damages exceed the liability limit, they are responsible for paying the remaining amount out of pocket.
Insuranceopedia Explains Limit Of Liability
An insurance policy specifies the amount of coverage it provides for various issues, including liability. Additional liability coverage typically requires a higher premium. Insurance companies also impose a limit on the liability coverage they offer. For example, a car insurance company might set a limit of $500,000 for liability coverage. If higher coverage is needed, the policyholder would require a separate liability insurance policy, commonly referred to as an umbrella policy.
