Legal Definitions - liability limit

Definition: The liability limit is the maximum amount of coverage that an insurance company will provide on a single claim under an insurance policy. It is also known as the limit of liability or policy limits.

Example: Let's say you have car insurance with a liability limit of $50,000. If you get into an accident and the other driver sues you for damages that exceed $50,000, you will be responsible for paying the remaining amount out of pocket.

Explanation: This example illustrates how the liability limit works in car insurance. The insurance company will only cover up to the specified amount, and any additional costs will be the responsibility of the policyholder. It is important to choose a liability limit that adequately protects you in case of an accident.