A homeowners policy has a liability coverage limit of $300,000. A guest is seriously injured at the insured's property and sues for $500,000. The jury awards $500,000. How is this handled?

LIABILITY POLICY LIMITS AND EXCESS JUDGMENT: The homeowners liability limit ($300,000) is the maximum the insurer pays — not a guarantee of full protection. WHAT THE INSURER DOES: Pay the policy limit ($300,000); defend the lawsuit up to and during trial (defense costs may be inside or outside the limit depending on policy); attempt settlement within limits to protect the insured from excess exposure; EXCESS JUDGMENT: The $200,000 above the policy limit becomes the insured's personal responsibility — can be collected from personal assets, wages (garnishment), bank accounts; UMBRELLA POLICY SOLUTION: A personal umbrella policy (typically $1M-$5M, approximately $300/year) picks up above the underlying homeowners liability limit — the $200,000 excess would be covered by a $1M umbrella; AGENT/ADJUSTER EDUCATION: Recommend umbrella policies to clients with assets to protect; review liability limits at each renewal.