Which policy component specifies the maximum amount an insured may collect for a loss?

The component that specifies the maximum amount an insured may collect for a loss is the policy limits. This is a critical aspect of any insurance policy as it defines the financial boundaries of coverage. In practical terms, policy limits indicate the insurer's maximum liability during a claims situation. If the damages exceed this limit, the policyholder will be responsible for any amount beyond what the insurer covers, making it essential for individuals or businesses to understand their policy limits when selecting insurance.

The other components serve different purposes: declarations provide essential information about the policy, such as the insured parties and the coverage details; loss estimation relates to assessing potential losses but does not set a recovery limit; and conditions outline the obligations and requirements of both the insurer and the insured, but do not state the coverage cap. Understanding policy limits ensures that policyholders are aware of the extent of their protection in the event of a claim.