Defense Inside vs Outside Limits
Definition. Defense costs can be paid in ADDITION to the policy limit (outside — better) or COUNTED AGAINST the limit (inside — depletes coverage).
Also known as: Defense Inside Limits, Defense Outside Limits
Most GL policies pay defense outside the limit. Most Professional Liability policies offer both options — outside is typically 15-25% more expensive but materially better protection because inside defense costs deplete the limit available to pay actual settlements.
Example
$1M Pro Liab with defense inside limits. $300K defense + $700K settlement = $1M total, limit fully exhausted. Same policy with defense outside limits: $700K settlement plus separate $300K defense = $1M settlement capacity preserved.
Sources cited
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📘 Educational content only.
Reviewed by California-licensed Property & Casualty insurance agent
Jason Wootton (CA License #0I94454). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.
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