What term is used to describe the total amount of money that the insurer is liable to pay for a covered loss?

The term that describes the total amount of money that the insurer is liable to pay for a covered loss is known as the policy limit. This refers to the maximum amount that the insurance company will pay out in the event of a claim, which is stipulated in the insurance policy itself. Understanding policy limits is crucial for both insurers and policyholders, as it defines the extent of financial coverage provided under the terms of the agreement.

In contrast, a deductible is the amount that a policyholder must pay out of pocket before the insurer begins to pay for a loss. Premium refers to the amount paid by the policyholder to maintain their insurance coverage, and subrogation is the legal right of an insurer to pursue a third party that caused a loss to recover the amount of the claim paid to the insured. Each of these terms plays a different role in the context of insurance policies, but the policy limit specifically identifies the insurer's maximum liability for covered losses.