What term indicates the amount of coverage provided by a policy?

The term that indicates the amount of coverage provided by a policy is known as the coverage limit. This refers to the maximum amount an insurer will pay for a covered loss under a policy. Coverage limits are a critical aspect of insurance agreements, as they define the financial boundaries of protection for the insured.

For example, if a homeowner has a policy with a coverage limit of $250,000 on their dwelling, the insurance company will pay up to that amount in the event of a total loss due to a covered peril. It's essential for policyholders to understand their coverage limits to ensure they have adequate protection for their assets and liabilities.

In contrast, the options of premium, deductible, and actual loss sustained serve different functions within an insurance context. The premium is the amount paid for the insurance coverage, the deductible is the amount the insured must pay out of pocket before the insurance coverage kicks in, and actual loss sustained refers to the specific losses incurred during an incident but does not determine the overall coverage provided by the policy. Understanding these distinctions helps policyholders make informed decisions regarding their insurance needs.