What is the primary purpose of Limitations in an insurance policy?

The primary purpose of limitations in an insurance policy is to reduce or eliminate coverage under certain conditions. Limitations specify the scenarios or circumstances in which coverage may not apply or may be restricted. This is important because it helps to manage risk for the insurer by outlining clear boundaries of what is covered and what is not.

Limitations often serve to protect the insurer from certain types of claims that may be deemed too risky or outside the intention of the policy. They provide both the insurer and the insured with a clear understanding of the coverage parameters, which can include aspects such as maximum payout amounts, specific exclusions that apply only in certain situations, or terms that must be met for coverage to remain effective.

In contrast, enhancing the scope of coverage, clarifying policy exclusions, and increasing premium amounts do not encapsulate the main objective of limitations. While exclusions clarify what is not covered, limitations focus specifically on conditions affecting the extent of coverage provided.