What is a Limited Policy?

What is a Limited Policy?

• A. Covers multiple lives and pays on the first death.
• B. Pays only under stipulated conditions, specifying the exposure covered and benefit amount.
• C. Pays a benefit only on death of the insured.
• D. Provides coverage for any accident regardless of condition.

Answer: (B)

A limited policy is a contract that provides coverage only for a narrow, defined risk and pays benefits only when that specific event occurs, with the exact benefit amount stated in the policy. This means the policy won’t pay for other risks—only those exposures that are explicitly covered and for the fixed amount they specify. That’s why the description that it pays only under stipulated conditions, identifying the exposure covered and the benefit amount, is the best fit. The other descriptions describe broader or different types of coverage (like coverage for death, multiple lives, or any accident), which aren’t what a limited policy is.

A limited policy is a contract that provides coverage only for a narrow, defined risk and pays benefits only when that specific event occurs, with the exact benefit amount stated in the policy. This means the policy won’t pay for other risks—only those exposures that are explicitly covered and for the fixed amount they specify. That’s why the description that it pays only under stipulated conditions, identifying the exposure covered and the benefit amount, is the best fit. The other descriptions describe broader or different types of coverage (like coverage for death, multiple lives, or any accident), which aren’t what a limited policy is.