What does the term "sublimit" refer to in insurance?

The term "sublimit" refers to a limit within the overall policy limit that applies to a specific type of coverage. This means that while an insurance policy may have a total coverage limit, certain types of claims or specific situations may have a lower limit, known as a sublimit. For example, a homeowner's policy might have a total coverage limit of $250,000 but include a sublimit of $10,000 for jewelry theft. This structure allows insurers to manage risk more effectively by capping potential payouts for certain types of claims, thereby providing a controlled way to handle specific coverages without affecting the overall policy limit.