Policy Limit

What is a policy limit in insurance?

A policy limit is the maximum dollar amount your insurance company will pay for a covered loss or claim. It is the ceiling on the carrier’s financial obligation under the contract. No matter how large the actual loss or judgment, the carrier pays nothing beyond the applicable limit. Everything above the limit is your personal responsibility, paid from your own assets unless you have additional coverage sitting above the primary limit, such as an umbrella policy.

How do per-occurrence and aggregate limits differ?

Different coverages on the same policy carry separate limits. A homeowners policy might have $450,000 for the dwelling structure, $200,000 for personal property, $100,000 personal liability, $40,000 other structures, and $5,000 medical payments to others. A commercial general liability policy typically has both a per-occurrence limit and an aggregate limit. The per-occurrence limit is the most paid on any single claim; the aggregate is the most paid across all claims in the policy year. When the aggregate is exhausted, the carrier owes nothing more for that policy year, even if new covered claims arise.

What happens when a judgment exceeds my policy limit?

Matching the limit to the realistic potential loss you face matters as much as meeting any minimum required by a lender or legal requirement. Georgia’s minimum auto liability limits are $25,000 per person and $50,000 per accident for bodily injury, as detailed in our guide on Georgia auto minimum limits. A moderate injury claim today, including surgery, hospitalization, physical therapy, and lost wages, can reach well into six figures. When a judgment exceeds your limit, the injured party can pursue your savings, investments, and future income for the gap. Georgia courts can garnish wages and place liens on real property to satisfy a judgment.

Are my property limits keeping up with rebuild costs?

Georgia homeowners face a related exposure on property limits. Dwelling limits are frequently set at the original purchase price or the mortgage balance, neither of which tracks what it costs to rebuild the structure today. Material and labor costs in recent years have pushed rebuild cost per square foot well above what most homeowners expect. For example, a home insured for $300,000 based on its purchase price might cost $420,000 to rebuild at current labor and material rates, leaving a $120,000 gap even after the carrier has paid in full under the contract terms. Our guide on replacement cost vs. actual cash value explains how that settlement calculation works.

How does an umbrella policy extend my limits?

Excess liability and umbrella policies layer additional limits over your primary auto and home coverage, typically starting at $1,000,000 of extra protection for a relatively modest annual premium. They sit above your underlying limits and respond once those primary limits are exhausted. For example, if a court awards $600,000 in damages and your auto liability limit is $100,000, a $1,000,000 umbrella covers the remaining $500,000 rather than leaving it to you personally. Our page on what an umbrella policy covers explains how the layers work together. A coverage review can compare your limits against your actual asset exposure and identify where any gap is yours to carry.