Liability Coverage
Insurance that pays for bodily injury or property damage you cause to others, including legal defense costs.
What is Liability Coverage?
Liability coverage is the portion of an insurance policy that protects the policyholder against claims from third parties alleging that the policyholder caused bodily injury or property damage. It covers legal defense costs, court-awarded judgments, and out-of-court settlements up to the policy limits. Liability coverage appears in virtually every personal and commercial insurance policy: homeowners policies include personal liability, auto policies include auto liability, and commercial policies include general liability. Policy limits are typically expressed as single occurrence limits (e.g., $300,000 per occurrence) or split limits (e.g., $100,000 per person / $300,000 per occurrence / $100,000 property damage).
Example
A dog owner's German shepherd bites a mail carrier, causing injuries requiring surgery. The injured party sues for $175,000 in medical expenses and lost wages. The homeowner's $300,000 personal liability coverage pays the full judgment plus $35,000 in legal defense costs — protecting the homeowner's savings and assets from a potentially devastating out-of-pocket loss.
Source: National Association of Insurance Commissioners — Home Insurance