A limitation in an insurance policy on the amount of coverage available to
cover a specific type of loss. A sublimit is part of, rather than in addition
to, the limit that would otherwise apply to the loss. In other words, it places
a maximum on the amount available to pay that type of loss, rather than
providing additional coverage for that type of loss. In professional liability
insurance, sublimits are usually a stated percentage of an aggregate limit of
coverage under a policy. For example, under a lawyers professional liability
policy written with a $500,000 aggregate limit of coverage, there may be a 10
percent sublimit on coverage (i.e., $50,000) for punitive damages. In property
insurance, however, sublimits may be stated as dollar amounts or as a
percentage of the limit that would otherwise apply. For example, under a
commercial property policy with a $2 million limit applicable to loss from all
other causes, there may be a $100,000 sublimit on coverage for loss from flood,
a $500,000 sublimit on loss from earthquake, and a debris removal sublimit of
25 percent of the direct damage loss amount. In both examples, the sublimit is
the most the insured can collect for the type of loss to which the sublimit
applies.