Limit of Liability
The limit of liability is the maximum amount in monetary terms for which an insurance company will accept liability on any specific loss or event. No insurance company can accept unlimited responsibility for any given loss; if they did the insurance company will not survive. The limit of liability is also often referred to the limit of indemnity.
The maximum amount of indemnity for a total loss is usually the amount on which the insurance premium is calculated. For example, if your car is insured for R300 000 and is declared a total write-off by the insurance company’s assessor, after an accident, the maximum you will be paid is R300 000 less the excess amount payable.
But, there are also sub-limits of indemnity or liability on individual events and you need to make sure that you are familiar with the limits in your car insurance policy. There will be limits placed on specified items such as your sound system. Actually, every possible event or peril will have a limit of liability. Sometimes it is expressed as an amount per person per event: For example: after an accident the insurer may state that they will pay R500 towards the medical costs of each injured person.
Limits of liability can also be expressed as a numerical value, instead of rand terms, such as 72 hours free storage or car-hire for a 24 hour period. Check your own policy document for your limits.