What signifies the maximum amount an insurance company will pay for a covered loss?

The term that signifies the maximum amount an insurance company will pay for a covered loss is known as the coverage limit. This limit is explicitly stated in the insurance policy and represents the total amount the insurer is obligated to pay for claims related to different types of coverage, whether it be for property damage, liability, or other events covered by the policy.

Understanding coverage limits is crucial for policyholders, as it helps them gauge the extent of their protection and informs them of the potential financial recovery available in the event of a covered loss. If a loss exceeds the established coverage limit, the policyholder would be responsible for covering the remaining expenses.

In contrast, a deductible is the amount the policyholder must pay out of pocket before the insurance coverage kicks in, while a premium is the amount paid for the insurance policy itself, and sub-limits pertain to specific types of coverage that fall under a broader policy limit, indicating restrictions within the overall coverage limit.