What do limits of liability define in a policy?

What do limits of liability define in a policy?

• A. The deductible amount the insured pays before coverage applies.
• B. The maximum amount the insurer will pay per claim and/or per policy period.
• C. The minimum premium required to keep the policy active.
• D. The annual increase cap for premiums.

Answer: (B)

Limits of liability specify the maximum the insurer will pay for covered losses, either for each individual claim or for all claims within a policy period. This cap means that once the loss hits that limit, the insurer stops paying, and the remainder would be the insured’s responsibility (subject to any deductible). If a policy shows both per-claim and aggregate limits, you can see how much is available for a single incident and how much the insurer will pay across all claims in the year. The deductible is a separate feature that determines how much you pay before the insurer contributes.

Limits of liability specify the maximum the insurer will pay for covered losses, either for each individual claim or for all claims within a policy period. This cap means that once the loss hits that limit, the insurer stops paying, and the remainder would be the insured’s responsibility (subject to any deductible). If a policy shows both per-claim and aggregate limits, you can see how much is available for a single incident and how much the insurer will pay across all claims in the year. The deductible is a separate feature that determines how much you pay before the insurer contributes.