Which of the following statements about Limits of Coverage is true?

• A. Policies may have multiple limits, such as per person, per accident, and aggregate limits.
• B. All limits are always per incident only.
• C. Limits of coverage apply only to life insurance.
• D. Limits of coverage are the same as deductibles.

Answer: (A)

Limits of coverage define the maximum amount a policy will pay for a covered loss, and many policies feature multiple limits. You’ll often see a per-person limit, a per-accident (per-incident) limit, and an aggregate limit for the policy period. For example, a liability policy might set $50,000 per person, $100,000 per accident, and $300,000 aggregate. This means the most the policy will pay for injuries to one person is $50,000, the most it will pay for all injuries in a single accident is $100,000, and the total payments over the policy period cannot exceed $300,000. This structure is what the statement describes.

Limits aren’t limited to per incident only; many policies have multiple limits that apply in different ways. Limits also apply to more than life insurance; various types of coverage use limits. And limits are not the same as deductibles, which are the amount you must pay out of pocket before the insurer starts paying.