Things to Know About Liability Limits

Have you ever wondered about the intricacies of liability limits in a personal injury or employment issue? Liability limits, or the limits of liability insurance, can be a complex topic, but understanding them can make a world of difference when you’re seeking justice and compensation.

This blog post will demystify these concepts, providing you with essential information about liability limits and their implications.

Liability Limits: What Are They and Why Do You Need Them?

Liability limits are the maximum amount of damages that an insurance company can be legally obligated to pay. These limits are specified in a liability policy, and they exist to protect both the policyholder and the insurer from financial losses. 

When an insured party is found liable for another person’s injury or loss, their insurance carrier is responsible for reimbursing that person up to the liability limit. It’s important to note that if a court awards damages over the limits, the policyholder is still responsible for paying any amount beyond what their policy covers.

For example, if you were involved in an auto accident and the court awarded damages totaling $100,000, and your liability limit was only $50,000, you are personally responsible for the additional $50,000 payment. It’s crucial to understand your policy’s limits to anticipate such costs.

Different Types of Liability Insurance Coverage

When it comes to personal injury or employment cases, there are several different types of liability insurance that policyholders can carry. These include:

  • General liability coverage: This type of insurance covers bodily injury and property damage claims (including libel/slander). It also provides legal protection for the insured should a third party sue them because of their actions.
  • Product liability coverage: This type of insurance covers any damages or injuries caused by a defective product. It is often required for businesses that manufacture and sell products and protects from negligence claims in product design, manufacturing, and warning labels.
  • Professional liability coverage: Commonly known as ‘errors and omissions’ coverage, this type of insurance protects individuals and businesses from claims of negligence, errors, and omissions in the professional services they provide.
  • Employer liability coverage: This insurance covers claims for employees who have experienced a work-related injury or illness that is not included in workers’ compensation.

 Limits of liability insurance doesn’t provide complete coverage, but reviewing your policy for any limitations and exclusions is important. Make sure to check for any restrictions or exceptions that may apply. We highly recommend reviewing your policy with a qualified attorney.

How to Know How Much Liability Coverage You Need

Typically, having liability insurance that can protect your net worth is a good idea. This includes the value of your cash, investments, and belongings minus any debts you may have. If you don’t have a lot of possessions, there’s less reason for someone to sue you, so you might not require extra coverage.

On the other hand, if you own a business, it’s essential to consider the potential financial risks and liabilities that may be involved. Carrying enough insurance helps ensure that any judgments awarded against you or your company can be fully covered.

Remember, the more risks you take, the more crucial it is to have sufficient insurance coverage in place. As you review your policy, be sure to understand the maximum amount of coverage and any exclusions, restrictions, or limitations.

Common Mistakes to Avoid When Shopping For Liability Insurance

When shopping for insurance liability limits, it’s crucial to avoid common mistakes that could leave you underinsured or financially vulnerable. Here are some pitfalls to avoid: 

  • Neglecting to assess your assets: One of the most significant mistakes is not evaluating your assets thoroughly. Failing to consider your net worth, including cash, investments, and belongings, can result in inadequate coverage. Ensure your liability insurance protects your assets adequately.
  • Ignoring business risks: If you own a business, don’t overlook the potential financial risks it may face. Neglecting to account for business-related liabilities can leave you exposed to substantial losses. Assess your company’s unique risks and secure adequate insurance to safeguard against them.
  • Overlooking policy limits: Understanding your policy’s limits of liability is crucial. Ignoring these limits can lead to unexpected out-of-pocket expenses if a court awards damages beyond what your insurance covers. Know the maximum amount your policy will pay and consider additional coverage if necessary.
  • Failing to review exclusions: Liability insurance comes with limitations and exclusions. It’s a mistake not to review these carefully. Some policies may have restrictions on certain types of claims or activities. Ensure you know any exclusions that may apply to your coverage.
  • Not seeking professional guidance: Insurance policies can be complex, and the language used can be confusing. Avoid the mistake of navigating this process alone. Seek advice from a qualified attorney or insurance professional who can help you understand your policy’s specifics and ensure it aligns with your needs.
  • Underestimating potential lawsuit costs: Don’t underestimate the potential costs of legal action. A lawsuit can incur significant expenses beyond the damages awarded, such as legal fees and court costs. Ensure your liability coverage accounts for these potential costs.
  • Not reviewing and updating regularly: Your insurance needs may change over time. A common mistake is failing to review and update your coverage regularly. Life events, business growth, or asset changes can necessitate adjustments to your policy.

Avoiding these common mistakes is essential to ensure your liability insurance provides adequate protection for your unique circumstances. Careful consideration and professional guidance can help you make informed decisions when selecting your coverage.

Additional Coverage Options You Should Consider

Now that you understand the importance of liability insurance and how to ensure you have appropriate coverage, it is wise to consider some additional coverage options.

An additional coverage option you may want to consider is umbrella insurance, which provides extra protection over and above your existing liability limits. This type of policy allows for higher payouts if a claim is made against you that exceeds your current coverage limits.

It’s also important to consider other types of coverage, such as health, property, auto, and life insurance. You may want to consider well-rounded coverage that offers protection against risks associated with your finances, lifestyle, and possessions. Make sure to ask your insurance agent and qualified professional about all the options available to you.

We Are Here To Help You Navigate the Complex Legal Landscape

Securing comprehensive liability insurance is crucial in protecting yourself, your assets, and your business. The pitfalls of inadequate coverage can lead to substantial financial risks, so investing time in understanding your policy’s liability limits, exclusions, and the extent of coverage is paramount. If you are bringing a claim against a company, a person, or an insurer, you need to understand how their policy limits work and how that may impact you or your claim.

At Fogelman Law Firm, our seasoned legal professionals can provide valuable insights and guidance in this arena. If you or someone you know has a personal injury or employment issue, we are here to help.

We have a track record of success, even taking cases to trial when necessary. Don’t leave your future to chance; contact us today for a free consultation to discuss your legal issue.


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