Glossary
Liability coverage, defined
The part of a policy that pays what you legally owe other people for injury or property damage you cause. It also pays the cost of defending you when someone sues over a covered accident, which can be as expensive as the damages themselves.
In practice
On an auto policy it is written as limits per person, per accident and for property damage; on a home policy it is a single limit for accidents on your property and for things you do away from it. It never pays for your own injuries or your own belongings. The state sets a minimum for auto; the minimum is a floor, and most serious accidents cost more than it.
An umbrella policy adds a further limit on top of the auto and home liability limits once those are used up.
A worked example
Suppose you rear-end a car and the other driver's medical bills come to $60,000, and your per-person limit is $50,000. The policy pays $50,000 and the remaining $10,000 is owed by you personally. With a $100,000 per-person limit the whole bill would be paid. Hypothetical figures, to show how the limit works.
Applies to: Auto InsuranceUmbrella Insurance