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📋 '''Limit of insurance''' is the maximum dollar amount an [[Definition:Insurance carrier | insurer]] will pay under a given [[Definition:Insurance policy | policy]] for covered losses, whether expressed on a per-occurrence, per-claim, or [[Definition:Aggregate limit | aggregate]] basis. It defines the outer boundary of the insurer's financial obligation and appears prominently on the [[Definition:Declarations page | declarations page]] of virtually every commercial and personal-lines policy. Because the limit shapes both the policyholder's protection and the insurer's [[Definition:Risk exposure | risk exposure]], it is one of the most consequential terms negotiated during the [[Definition:Underwriting | underwriting]] process.

⚙️ Policies typically structure limits in layers. A [[Definition:Commercial general liability insurance (CGL) | commercial general liability]] policy, for instance, may carry a per-occurrence limit and a general [[Definition:Aggregate limit | aggregate limit]] that caps total payouts across all occurrences in the policy period. In [[Definition:Property insurance | property insurance]], the limit may correspond to the [[Definition:Insurable value | insurable value]] of the asset, while [[Definition:Professional liability insurance | professional liability]] policies often apply limits on a claims-made basis. When losses exceed the primary limit, [[Definition:Excess insurance | excess]] or [[Definition:Reinsurance | reinsurance]] layers engage, each carrying its own stated limit and [[Definition:Attachment point | attachment point]]. Adjustments to the limit directly affect the [[Definition:Premium | premium]] charged, since a higher limit means the insurer assumes a broader band of potential loss.

🔑 Selecting the right limit is a decision that resonates across the entire risk management chain. An insufficient limit can leave a policyholder financially exposed after a catastrophic event, while an inflated one results in premium dollars spent on coverage that will almost certainly never be triggered. [[Definition:Insurance broker | Brokers]] play a central advisory role here, often leveraging [[Definition:Limit adequacy | limit-adequacy]] studies and peer benchmarking to guide clients. From the carrier's perspective, limits drive [[Definition:Capacity | capacity]] allocation and influence how much [[Definition:Reinsurance | reinsurance]] protection must be purchased. Understanding how limits interact with [[Definition:Deductible | deductibles]], [[Definition:Self-insured retention (SIR) | self-insured retentions]], and [[Definition:Coinsurance | coinsurance]] provisions is essential for anyone involved in structuring or evaluating an insurance program.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Aggregate limit]]
* [[Definition:Policy limit]]
* [[Definition:Limit adequacy]]
* [[Definition:Attachment point]]
* [[Definition:Excess insurance]]
* [[Definition:Deductible]]
{{Div col end}}

Definition:Limit of insurance - Revision history

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