When a liability claim exceeds the maximum amount covered by an insurance policy, the insured party becomes personally responsible for the remaining balance. For example, if a car accident results in $150,000 in damages, but the driver’s policy limit is $100,000, the driver is liable for the additional $50,000. This excess liability can be pursued through various legal means, including wage garnishment and liens on assets.
Understanding this financial responsibility is crucial for individuals and businesses. Protecting personal assets requires a thorough assessment of risk and adequate insurance coverage. Historically, policy limits have evolved alongside societal changes and economic conditions, reflecting the increasing costs associated with liability claims. This underscores the ongoing need to review and adjust coverage as circumstances change.
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