What Does Sublimits Mean?
Sublimits are extra limitations in an insurance policy's coverage of certain losses. They are part of the original limit. That is, they do not provide extra coverage, but set a maximum to cover a specific loss. Sublimits can be expressed as a dollar amount or as a percentage of the coverage available.
Insuranceopedia Explains Sublimits
For example, in a $500,000 business liability policy to cover lawsuits, it might have a 10% sublimit to cover punitive damages. This means that only $50,000 of the coverage can go toward paying for the specified loss. Alternatively, a homeowners policy may specify that of its $500,000 coverage, only $100,000 and $50,000 can go toward losses from floods and earthquakes, respectively. The insured cannot receive an insurance payout in an amount exceeding the sublimit for the types of loss specified.