Basic Limits of Liability

Definition - What does Basic Limits of Liability mean?

Basic limits of liability refers to the lowest level of liability insurance that is legally allowed to be purchased for a certain liability. For example, people who drive cars must purchase at least a basic limit of liability insurance in order to legally drive the car. This liability insurance is typically offered in an auto insurance policy.

Insuranceopedia explains Basic Limits of Liability

The reason why basic limits for liability are required by the government for some circumstances is because there are often inherent risks in doing certain things like driving a car, or running a manufacturing business, etc. Without liability insurance, then these activities can result in extreme amounts of losses to every party involved if an accident occurs. Usually, a policyholder has an option to purchase insurance coverage that goes well beyond a basic limit of liability. However, doing so tends to be more expensive. So, many people simply buy the basic limit.

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