Understanding Policy Limits: What You Need to Know About Insurance Coverage

What are policy limits?

The maximum amount an insured may collect for a loss under the terms of the policy

Policy limits refer to the maximum amount that an insurance policy will pay out for a covered claim. These limits are set by the insurance company and are outlined in the policy agreement. Essentially, policy limits act as a cap on the amount of money that the insurance company will pay out for a specific type of coverage. For example, if a person has a liability insurance policy with a $100,000 policy limit, and they are found liable for damages worth $150,000 in a car accident, the policy will only cover up to the $100,000 limit. The policyholder would be responsible for paying the remaining $50,000 out of pocket. It is important for individuals to understand their policy limits and make sure they have adequate coverage for their needs.

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