Hawaii Insurance License Practice Exam

Question: 1 / 400

In liability insurance, what does the term "coverage limit" refer to?

The maximum amount the insurer will pay for a claim

In liability insurance, the term "coverage limit" specifically refers to the maximum amount that the insurer will pay for a claim or series of claims within a policy period. This limit is a critical component of any insurance policy, as it defines the extent of the insurer's financial responsibility in the event of a covered incident.

For example, if a liability insurance policy has a coverage limit of $500,000, the insurer will cover losses up to that amount for any given claim. If the damages exceed this limit, the insured would be responsible for the additional costs. Coverage limits can vary by policy and can be set for individual claims or as an aggregate limit for multiple claims made during the policy term.

This component is vital for both the insurer and the insured to understand, as it determines the financial protection provided by the insurance and helps in assessing risk and planning for potential liabilities.

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The total number of claims allowed in a policy period

The minimum amount required for premiums

The deductibles applicable to each claim

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