In commercial insurance, what does 'coverage limit' refer to?

In commercial insurance, 'coverage limit' refers to the maximum amount that an insurer is willing to pay for a covered loss under a policy. This definition is critical for policyholders to understand, as it establishes the upper boundary of the insurer's liability for any claims made during the policy term. If a claim exceeds this limit, the policyholder would be responsible for any additional costs beyond the coverage limit.

Understanding coverage limits is vital for businesses when assessing their risk exposure and ensuring they have adequate protection against potential losses. Policies may have different coverage limits for different types of risks or incidents, and these limits can significantly impact the financial security of a business in the event of a claim. Selecting adequate coverage limits is a key part of managing risk in commercial insurance.