Insurance terminology explained in simple terms
In indemnity insurance, coverage denotes the maximum amount up to which the insurer must pay out in case of a damage event.
In most cases companies, self-employed persons and freelancers, as well as private individuals, do not have any limitation of liability, which poses a significant risk not only to policyholders but also to insurers. Insurers can calculate this risk by agreeing to abstract maximum benefit limits, or so-called coverage.
In other areas of insurance, such as contents insurance, for example, the maximum damage (= the cost to replace the entire contents of a house) can be determined very accurately. In this case, we talk about an insured sum instead of (abstract) coverage.
In indemnity insurance, coverage is usually indicated separately for personal injuries, property damage and financial losses. However, your insurer may also provide lump-sum coverage, such as for personal injuries and property damage, for example.
Term: Sum Insured
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