Your limits of liability are what the insurance company will pay on your behalf in the event of a claim. If your limits of liability are “$1,000,000 / $3,000,000” it would mean that the insurance company would pay a maximum of $1 million per occurrence and $3 million per year for claims. For further clarification, refer to the examples below and assume limits of liability of $1,000,000/$3,000,000:
In one year you have 4 lawsuits each for $800,000:
The insurance company pays $3.000,000 and you are responsible for $200,000.
In one year you have 2 lawsuits each for $2,000,000:
The insurance company pays $2,000,000 ($1 million each) and you are responsible for $2,000,000 ($1 million each).
In one year you have 9 lawsuits each for $20,000:
The insurance company would pay everything.
So, depending on your individual risk – there are a wide variety of limits of liability available that may be an attractive option. However, please note that most states have minimum requirements for limits of liability should you have hospital privileges.