Texas Property and Casualty License Practice Exam 2025 - Free Practice Questions and Study Guide

The limits of liability in an insurance policy specify the maximum amount that the insurer will pay for claims made under that policy. This means that if a claim arises, the insurer will cover losses up to a predetermined limit, which is stated in the policy. For example, if a policy has a limit of $100,000 for liability coverage, that is the highest amount the insurer will pay for covered claims. It is crucial for policyholders to understand these limits, as they determine the extent of financial protection provided by the insurance.

The other options discuss aspects that are not related to the limits of liability. The total premium amount pertains to the cost of the insurance coverage rather than the coverage amount itself. Minimum coverage required by law refers to mandated coverage levels that must be maintained according to state regulations, which can vary significantly. The timeframe during which claims can be made relates to policy conditions regarding the period available for submitting claims, rather than the financial cap on claims payouts.