Annual Limit

Last Updated: April 20, 2018

Definition - What does Annual Limit mean?

An annual limit is the maximum amount that an insurance company will pay to cover losses and damages within a year.

Almost all policies feature an annual limit. Under the Affordable Care Act, however, health insurance companies are prohibited for imposing annual limits on benefits that are considered essential, such as hospitalization and prescription drug purchases.

Insuranceopedia explains Annual Limit

While the Affordable Care Act prohibits annual limits for certain essential services, there are some medical or health needs that insurers can still cover with an annual limit. Dental and optical coverage, for instance, are important to ensure the health and vision of patients, but insurers are still permitted to impose an annual limit on them.

Annual limits apply to policies beyond health insurance. If you buy a car, for instance, the policy will be capped at a certain amount both for the vehicle and the driver. If the insurance contract states that the policy will only pay for vehicular damage up to $10,000, it is the responsibility of the insured to pay for any amount exceeding this within a single policy year.

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