What does "coverage limit" refer to in insurance?

In insurance terminology, "coverage limit" specifically refers to the maximum amount that an insurer is obligated to pay for a covered loss. This limit is crucial because it defines the financial boundary for the insurer's liability under the policy. For example, if a policy has a coverage limit of $100,000, the insurer will pay up to that amount for covered claims. If the loss exceeds that limit, the policyholder would be responsible for any excess amount.

Understanding coverage limits helps policyholders know the extent of protection they have and assists in making informed decisions when selecting policies to ensure they have adequate coverage for potential risks. Coverage limits can vary by type of insurance, such as property, auto, or liability insurance, and are a key aspect of any insurance contract.

The other options do not adequately define "coverage limit." The timeframe of coverage refers to the duration the policy is in effect; the minimum required coverage amount pertains to statutory requirements rather than a policy's specific limit; and the range of services included in a health policy relates to benefits rather than monetary limits of coverage.