What term describes the maximum amount an insurance policy will pay out for a covered loss?

The term that describes the maximum amount an insurance policy will pay out for a covered loss is "policy limit." This is a crucial concept in insurance as it defines the insurer's liability in the event of a claim. Each policy has specific limits established in the terms of coverage, which can vary based on the type of insurance and the specifics of the policy itself. Understanding the policy limit helps insured parties grasp their potential recovery in the event of a loss, ensuring they are aware of the financial protection the policy provides.

Differentiating from the other terms, "deductible" refers to the amount the policyholder must pay out-of-pocket before the insurance coverage kicks in, which does not describe a maximum payout scenario. "Coverage amount" is a broader term and can refer to different types of coverage under a policy but does not specifically denote the maximum payout. Lastly, "premium limit" is not a standard term in insurance; premiums are the payments made for the insurance policy rather than limits on payouts. Thus, "policy limit" is the most precise term for the maximum that can be received from an insurance claim.