How are supplementary payments paid in liability insurance policies?

• A. In addition to the limits of liability
• B. Subtracted from the limits of liability
• C. As a separate limit
• D. Not paid

Answer: (A)

Supplementary payments are paid in addition to the policy’s limits of liability. They cover defense costs and other specified expenses, such as court costs, interest on judgments, and premiums for appeal bonds, without reducing the amount available to pay damages. This means the insurer funds these defense-related costs separately, helping you get representation and cover miscellaneous expenses even when the damages claim approaches the limit. For example, if you have a $100,000 liability limit and defense costs amount to $5,000, those $5,000 are paid on top of the $100,000 limit rather than subtracting from it.