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Simple English definitions for legal terms
policy limits
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A quick definition of policy limits:
Policy limits refer to the maximum amount of coverage that an insurance company will provide for a single claim under an insurance policy. This means that if you have an insurance policy with a certain limit, the insurance company will only pay up to that limit if you make a claim. For example, if your car insurance policy has a limit of $50,000 and you get into an accident that causes $60,000 in damages, your insurance company will only pay up to $50,000 and you will be responsible for the remaining $10,000.
A more thorough explanation:
Definition: Policy limits refer to the maximum amount of coverage that an insurance company will provide on a single claim under an insurance policy. It is also known as liability limit or limit of liability.
Example: Let's say you have an auto insurance policy with a liability limit of $50,000. If you get into an accident and the damages exceed $50,000, you will be responsible for paying the remaining amount out of pocket.
Explanation: This example illustrates how policy limits work in an insurance policy. The insurance company will only cover up to the maximum amount specified in the policy, and any additional costs will have to be paid by the policyholder.