In general liability policies, which provision typically addresses defense costs?

In general liability policies, the provision that typically addresses defense costs indicates that the costs associated with defending against claims are considered to be part of the overall limit of liability. When the provision states that "defense is provided inside the limits," it means that any legal defense costs incurred by the insurer while defending a claim will reduce the total amount of coverage available for liability payouts.

This is important for policyholders to understand because if defense costs are substantial, they can significantly consume the liability coverage limit, potentially leaving less available for settlements or judgments once a claim is resolved. This arrangement contrasts with some policies that might offer a separate limit for defense costs, allowing the policyholder to have defense costs covered without impacting the liability limits directly. Understanding these provisions helps individuals and businesses effectively assess their exposure and coverage needs under their general liability insurance policies.