What does "coverage limits" refer to in an auto policy?

Coverage limits in an auto insurance policy refer specifically to the maximum amount an insurer will pay for a covered loss. Each type of coverage, such as liability, collision, and comprehensive, has its own specified limit that defines the highest payout available when a claim is made. For example, if a policy has a liability coverage limit of $100,000, the insurer will pay up to that amount for claims related to bodily injury or property damage to another party in an accident where you, the insured, are at fault.

Understanding coverage limits is essential for policyholders as it helps them know the extent of financial protection available. If a loss exceeds the coverage limit, the insured is responsible for paying the remaining costs out of pocket. This makes it crucial for drivers to assess their risks and choose appropriate coverage limits to protect their financial interests adequately.