Define 'sub-limit' within an insurance policy.

The term 'sub-limit' refers specifically to a maximum amount that can be claimed for certain types of coverage within an insurance policy, rather than applying to the overall limit of the policy. This means that while a policy may have a broad coverage limit, certain categories of claims may only be covered up to a specified sub-limit. For example, within a commercial property insurance policy, there might be a sub-limit for the coverage of equipment breakdown, which is lower than the overall limit of the policy itself.

Understanding sub-limits is important for policyholders because they can affect risk management strategies and financial planning, especially if they need to account for potential losses in specific areas that are not fully covered by the overarching policy limits.