The maximum amount an insurance company will pay for a specific type of loss within your policy. It's a smaller limit inside your main policy limit. For example, if your policy has a $1 million total limit, it might only cover up to $100,000 for equipment damage. Even if you have room left in your main limit, you can't get more than the sub-limit for that specific type of claim. Sub-limits serve multiple purposes: managing insurer exposure to high-frequency perils, encouraging risk mitigation in vulnerable areas, and maintaining affordable premiums. Critical considerations include: whether sub-limits erode the aggregate (reducing overall coverage), whether multiple sub-limits apply to single incidents (limiting total recovery), and how sub-limits interact with retentions/deductibles.
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