Liability limits refer to the maximum amount of money that an insurance company will pay out on behalf of the policyholder in the event of a claim. These limits are a fundamental part of liability insurance policies, which provide coverage for the policyholder against claims arising from injuries and damage to other people or property. Liability limits are typically outlined in an insurance policy as per-occurrence and aggregate limits.
A per-occurrence limit is the maximum amount the insurer will pay for a single incident or claim. For example, if a policy has a per-occurrence limit of $100,000, the insurer will cover costs up to that amount for any one claim.
An aggregate limit is the total amount the insurer will pay for multiple claims over the course of the policy period, usually one year. If the policy has an aggregate limit of $300,000, the insurer will not pay more than that amount for all claims combined within the policy term.
Policyholders must choose their liability limits when purchasing insurance, and these limits will affect their coverage and premiums. Higher liability limits generally provide more protection but also come with higher premiums. It is important for policyholders to select limits that adequately protect their assets and financial stability in case they are held liable for significant damages or injuries.