What is a "sublimit" in an insurance policy?

A sublimit in an insurance policy refers to a specific limit on coverage for a particular type of risk or peril, distinct from the overall policy limit. This means that while a policy may have a broad coverage limit, certain risks within it may be subject to their own, lower limits. For example, a homeowner's insurance policy may have a general coverage limit, but may specify a sublimit for items like jewelry, artwork, or collectibles, restricting the payout for those items regardless of the total policy limit. This allows insurance companies to manage risk by capping their exposure on more vulnerable or high-value items while still providing coverage for the overall policy.

The other options refer to concepts that do not accurately define a sublimit. For instance, while liquidated damages might relate to contracts and their enforcement, they do not connect to the insurance term, nor do federal requirements pertain to sublimits in policies. Lastly, sublimits are not related to insurance types that require no premium, as they are integral elements defining the terms and limitations of coverage within an insurance contract.