When it comes to insurance, liability limits are the maximum amount of damages (“compensation”) that an insurance company will pay on your behalf. This limit is set to protect the insurer from unlimited losses, and it also gives policyholders an incentive to avoid being sued. The cost of supplemental coverage depends on the liability coverage you have in your basic homeowners policy, often referred to as underlying coverage. If you're a business owner, opting for an insurance policy with a higher aggregate liability limit can help you reduce your risks. The liability coverage in your standard homeowners policy covers both the cost of your defense and the damages that a court determines you should pay.
The content of these educational articles does not alter the terms, conditions, exclusions or limitations of the policies issued by Lemonade, which vary depending on the state of residence. It is important to understand the limits of liability of a homeowners policy before you buy it, as they tell you if you have enough insurance. The liability limit for coverage of other structures is usually a percentage of home coverage, often around 10 percent. Not only do insurance policies limit how much you'll pay for a single incident, but the total liability limit is the limit for the entire term of the policy, which is usually one year. For example, the liability limit for your home coverage is the amount that your insurance company considers necessary to rebuild your home based on location and construction costs. The liability limit refers to the maximum amount of money your insurer is required to pay if something bad happens to you, your things, or your property.
Most policies also offer medical payment coverage, which would reimburse you for basic medical expenses incurred under a liability claim.
