The largest total amount the insurance company will pay for covered losses is called

• A. Lifetime limit
• B. Limits of coverage
• C. Insurance policy
• D. Insurance contract

Answer: (B)

The main idea here is that insurance payouts are capped by the policy’s limits of coverage. This term refers to the maximum amount the insurer will pay for covered losses, whether for a single claim or in total over the policy period. These limits set a ceiling the insurer won’t exceed, so even if losses stack up, total payments cannot surpass what the policy allows. A lifetime limit is just a specific type of limit that applies to total payments over the insured’s lifetime, rather than the general cap for the policy. The insurance policy or contract describes the entire agreement, not the maximum payout amount itself.