Which term describes the maximum payment the insurer will make for a given coverage?

• A. Aggregate Limit
• B. Policy Maximum
• C. Cap
• D. Limit of Insurance

Answer: (D)

Limit of insurance is the maximum payment the insurer will make for a covered loss under that coverage. It acts as the ceiling for protection, specifying how much the insurer will pay for claims arising under that particular coverage. Policies often split limits into per-occurrence (or per-claim) and aggregate limits: the per-occurrence limit caps what can be paid for a single event, while the aggregate limit caps the total paid for all claims during the policy period. While some policy pages may refer to a “policy maximum” or use an aggregate limit term, the precise, formal term for the amount the insurer will pay is the limit of insurance. If a loss reaches or exceeds this limit, the insurer’s obligation stops at that cap, and any excess would have to be covered by other protections or endorsements that provide additional capacity.