Liability limits in an insurance policy refer to the maximum amount an insurance company will pay for covered claims or damages arising from a covered incident. These limits are typically specified in the policy and represent the financial protection provided by the insurance company to the policyholder.
There are generally two types of liability limits in insurance policies:
Bodily Injury Liability Limit: This limit represents the maximum amount the insurance company will pay for injuries or death caused to another person as a result of an accident or incident involving the insured party. It covers medical expenses, rehabilitation costs, and sometimes legal fees if the injured party sues for damages.
Property Damage Liability Limit: This limit refers to the maximum amount the insurance company will pay for damages caused to another person's property as a result of an accident or incident involving the insured party. It covers repair or replacement costs for damaged property, such as vehicles, buildings, or other possessions.
Both bodily injury and property damage liability limits are usually expressed as a split limit or a combined single limit (CSL):
Split Limit: In a split limit, the policy specifies separate maximum amounts for bodily injury per person, bodily injury per accident, and property damage per accident. For example, a split limit of 100,000/300,000/50,000 means the insurance company will pay up to $100,000 per injured person, up to a total of $300,000 for all injuries in the accident, and up to $50,000 for property damage.
Combined Single Limit (CSL): In a combined single limit, there is a single maximum amount that applies to all covered liabilities, regardless of whether it involves bodily injury or property damage. For example, a CSL of $500,000 means the insurance company will pay up to $500,000 in total for all covered claims and damages arising from the insured party's liability.
It's important to review your insurance policy or consult with your insurance provider to understand the specific liability limits and coverage provided by your policy, as these limits can vary depending on the type of insurance (auto, homeowners, general liability, etc.) and the terms and conditions of the policy.
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