No policy promises unlimited payment. A coverage limit is the maximum amount an insurer will pay for a covered loss under a particular coverage part or the policy as a whole. Limits may apply per occurrence, per claim, or in the aggregate for the policy period.

Selecting appropriate limits requires an assessment of potential loss severity and of assets exposed to liability claims. Underinsurance leaves the policyholder responsible for the excess; over-insurance wastes premium. Umbrella and excess policies sit above primary limits to provide additional capacity.

Some coverages have sub-limits for specific exposures such as flood, mold, or defense costs inside the limit. Inflation and rising jury awards can erode the real protection of fixed limits over time. Periodic review keeps limits aligned with current exposure and risk tolerance.

• Maximum amount payable for a covered loss
• May be per occurrence or aggregate
• Should reflect potential severity and assets at risk
• Can be extended by excess or umbrella policies