In liability insurance, what does a 'Cap' refer to?

In liability insurance, a 'Cap' refers to the maximum amount an insurer will pay under the policy for a covered claim. This cap establishes a limit on the insurer's financial responsibility, ensuring that once the claim amount reaches this predefined threshold, the insurer will not provide any further monetary assistance. It acts as a protective measure for the insurer and helps policyholders understand the extent of their coverage.

For example, if a liability insurance policy has a cap of $1 million, any claims exceeding this amount would not be covered by the insurer, thus highlighting the importance of policyholders being aware of their cap limit when assessing their risk and coverage needs.

The other options provided represent different concepts in the realm of liability insurance. A minimum coverage amount is not related to the cap, as it indicates a baseline rather than a maximum. The deductible amount pertains to the portion of the claim that the policyholder is responsible for before the insurer pays, and total premiums collected refer to the overall income of the insurer from policyholders, which does not directly impact the limits of coverage.