Policy limit
The maximum amount an insurer may pay under a specified coverage, claim or policy period.
Also called
coverage limit · limit of insurance
What it means
The payment ceiling stated for a coverage, subject to all policy terms.
Example
A liability coverage limit of $2 million generally caps the insurer's covered liability payment at that amount.
Canada context
Insurance wording and mandatory coverage can differ by province, insurer and policy form. Read the declarations, endorsements and full policy wording that apply to you.
Common confusion
A policy limit is not a promise that every claim will be paid to that amount and is not always the property's replacement cost.
Important
This plain-language explanation is general information, not legal advice or a substitute for your policy wording. Ask a licensed insurance professional about your situation.
Last reviewed August 17, 2026
Sources
General information only. Coverage and terminology can differ by province, insurer, and policy wording. Consult your policy and a licensed insurance professional.