Policy Limit

Definition - What does Policy Limit mean?

A policy limit refers to the monetary amount that an insurance company will pay out in relation to a specific insurance policy claim. It refers to the maximum amount of money for which an insurance company is responsbile. For example, a car insurance policy may have a policy limit of $1 million. This means that the most the insurance company will pay if you make a claim is $1 million.

Insuranceopedia explains Policy Limit

Insurance policy limits are contractually agreed upon at the time an insurance policy is created. Policies specify either the individual limit (the most amount payable in one claim) or the aggregate limit (the highest amount that can be paid in any policy year for all claims). For example, when you consider a policy with an individual limit of $1 million and an aggregate limit of $4 million, this policy will provide a maximum of $1 million per claim and $4 million for all claims during a policy term.

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