Liability insurance policies have either legal defense costs inside or outside the policy limits. This is a pretty simple concept, but the difference in the two types of policies can be consequential in the event of a large claim.
When legal defense costs are inside the policy limits any amount paid by the insurance company lowers the amount of money available to pay any possible judgment or settlement.
If the defense costs are outside of the policy limits any costs expended on your defense does not reduce the amount available for payment of any judgment or settlement.
This is best explained by a simple example. Let us say there is a claim and you have the Standard $1 million liability coverage. Your business is sued as a result of an accident. There is a trial and a judgment against your business. The judgment is $750,000 and the insurance company spent $500,000 on your legal defense. This means that the total amount paid on your behalf by the insurance company is $1,250,000. If your policy has cost inside the policy limits, you will be on the hook for $250,000. If your policy has costs outside the policy limits you would owe nothing. It is important also to note that outside the limit policies are getting harder to find and generally cost more than the comparable inside the limits policy.