What do liability limits refer to in personal lines insurance?

Liability limits in personal lines insurance specifically denote the maximum amounts that an insurance company will pay for claims filed against the insured. This involves coverage for situations where the insured is found legally responsible for causing harm to another person or their property, encompassing bodily injury and property damage. The policy outlines these limits to define the insurer's financial exposure and the maximum coverage available to the insured in the event of a claim.

Understanding these limits is crucial because they help individuals assess how much protection they have and whether it is adequate considering their potential risk exposure. For instance, if the liability limit is set at a certain amount and a claim exceeds that limit, the insured would be responsible for any difference. This highlights the importance of selecting appropriate liability limits based on personal circumstances and risk factors.