What is the 'Limit of Liability' in a life insurance policy?

The 'Limit of Liability' in a life insurance policy refers specifically to the maximum amount that the insurance company will pay out in the event of a claim, typically upon the death of the insured party. This amount is commonly known as the death benefit. It is the core function of life insurance—to provide financial support to the beneficiaries of the policyholder, ensuring that they receive a pre-determined sum of money when the policyholder passes away.

This concept is critical for both the insurer and the insured, as it establishes the boundaries of the insurer's responsibility. It helps in determining the premium amounts that policyholders will pay based on the risk involved and the sum assured. The death benefit can also be influenced by factors such as the insured's age, health status, and the specific terms of the policy bought.

In contrast, the other options do not accurately capture the definition of 'Limit of Liability' as it pertains to life insurance. The total amount of premiums paid does not determine the liabilities of the insurer but represents what the policyholder has invested. The total number of claims filed pertains to the claims history of the policy or company and does not define the limit of an individual policy. Lastly, limits on coverage for disability are specific to disability insurance and are