What does 'coverage' mean in the context of insurance?

In the context of insurance, 'coverage' refers to the extent of protection provided by an insurance policy. This concept encompasses the specific risks or perils that are covered, the circumstances under which claims can be made, and the limits of liability that define how much the insurer will pay in the event of a loss. Understanding coverage is essential for policyholders, as it defines what is protected under their policy and informs them about the scope of financial security they can expect.

This directly impacts a policyholder's ability to recover from losses, making it a critical aspect of any insurance agreement. For example, different policies may offer varying levels of coverage for different types of risks, whether it’s for property, liability, or health insurance. As such, assessing coverage helps individuals or businesses to identify whether they have adequate protection tailored to their specific needs.