Inside the limits or outside the limits might not sound all that important, but when a claim occurs, it can be extremely important when it comes to Business Insurance. When considering your liability policy (General Liability, Professional Liability, etc.), you should look at this option very carefully. Simply put, it refers to costs of legal defense and how they are calculated based on your liability limits. Lets look at this in more detail below.
Inside the Limits
Lets say you have liability limits of $1,000,000 and you have been brought into a lawsuit that is going to require substantial legal defense costs. Inside the Limits means the legal defense costs are inside or included in the $1,000,000 per occurrence maximum that the insurance company is going to pay out. So if the carrier pays out $150,000 in defense costs, and you are found at fault, this leaves $850,000 to pay in damages. If damages exceed this amount, the business will have to handle since the insurance company has fulfilled their obligation.
Outside the Limits
Conversely, Outside the Limits means defense costs are outside the $1,000,000 limits. Meaning defense costs have their own limits like the General Liability Insurance.
Obviously choosing Outside the Limits is going to be the better option for your business. However, it does come at a price, since typically this option is going to be additional premium. It's important to understand which options are available to you and also understand which option you have. Sometimes you'll see "Defense outside the limits" listed as a coverage option.
If you have any questions about Inside the Limits or Outside the Limits or any other Business Insurance questions, please feel free to reach out to us. We are always happy to help.
Commercial Insurance Agent