Which statement describes a policy limit in auto insurance?

• A. The minimum amount the insurer will pay.
• B. The total premium.
• C. The deductible amount.
• D. The maximum amount the insurer will pay for a covered loss.

Answer: (D)

Policy limits are the maximum the insurer will pay for a covered loss. In auto insurance, these limits cap how much the company will contribute for injuries or property damage from a single incident (with separate limits often for bodily injury and for property damage). Any amount beyond those limits would be your responsibility if you’re at fault. The premium is simply the price you pay to have the policy, and the deductible is the amount you pay out of pocket before coverage applies. So the statement that describes a policy limit is that it’s the maximum amount the insurer will pay for a covered loss.