In liability policies, what are supplementary payments?

Supplementary payments in liability policies refer to payments made in addition to the policy's limit of liability. These payments are intended to cover specific expenses that arise during the claims process, which helps alleviate the financial burden on the insured without affecting the overall liability limit.

Typically, supplementary payments may include costs such as legal fees for defense in a lawsuit, costs for bail bonds, or expenses incurred for post-judgment interest. By covering these additional costs, supplementary payments ensure that the insured can effectively defend themselves without exhausting their primary liability limits. This coverage adds an important layer of financial protection, allowing individuals and businesses to handle claims more effectively.

Understanding the concept of supplementary payments is crucial, as it highlights how liability policies are structured to provide a broader safety net for policyholders facing legal claims.