What is referred to as the maximum liability in an insurance contract over a specified period?

The maximum liability in an insurance contract over a specified period is known as the policy limit. This term defines the maximum amount an insurer will pay for covered losses during the policy's term. Understanding this concept is crucial because it helps both policyholders and insurance professionals to know the boundaries of coverage provided by the insurance policy. If a claim exceeds the policy limit, the insured would be responsible for the excess amount.

The term "aggregate limit" can often refer to the total amount of coverage available under a policy for multiple claims during the policy term, which may initially seem similar. However, when specifically addressing maximum liability, the "policy limit" is the term that is most commonly used to define the cap on what the insurer will payout for individual or total claims.

This distinction highlights the importance of clearly understanding different terms in insurance contracts, as they can have specific implications on coverage and claims handling. In this context, the aggregate limit, while relevant, typically applies to broader coverage over the term rather than the singular limit associated with a specific claim or policy period.