Basic limits of liability refer to the maximum amount of financial responsibility that an insurance policy will cover in the event of a claim or loss. These limits are defined in the insurance policy and vary depending on the type of coverage and the specific terms and conditions of the policy. Basic limits of liability typically apply to various types of insurance, including auto insurance, homeowners insurance, and commercial liability insurance. For example, in auto insurance, liability coverage may have separate limits for bodily injury liability per person, bodily injury liability per accident, and property damage liability. It’s essential for policyholders to understand their policy’s limits of liability to ensure they have adequate coverage in the event of a claim. If the damages exceed the policy limits, the insured may be responsible for paying the remaining costs out of pocket.
The minimum amount for which a liability policy can be written, as dictated by the published rates or the law.
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This glossary post was last updated: 29th March, 2024.
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