What are sub limits in the context of insurance?

Sub limits in the context of insurance refer to specific limits that are applied to certain categories or types of coverage within a broader insurance policy. This means that even if a policy has a high total limit, certain types of claims may only be eligible for a payout up to a designated sub limit.

The concept of applying limits per occurrence, incident, or person means that for specific scenarios—such as damage to property, liability claims, or medical expenses—the insurer will only cover expenses up to the specified sub limit. This distinguishes it from the overall policy limit, which applies to the total coverage provided by the insurer for all claims.

Thus, understanding sub limits is crucial for policyholders as it helps them recognize not only the maximum coverage allowed but also the restrictions specific to certain claim types or incidents. This can greatly influence financial planning and risk management in the case of a loss.