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When you purchase a custom insurance policy, you often think about key components like what areas of coverage you’ll get, the deductible, and other basics. However, it’s equally important to consider how the cyber policy or professional liability policy, or any other commercial policy will protect you in the event of a claim. Which brings us to: policy limits. These play a critical role in the event you have a cyber attack, make a mistake, or face some other claim. Let’s take a look at what policy limits are and why they matter when you purchase a policy.
What Are Policy Limits?
In insurance, policy limits are the maximum dollar amount that an insurer will pay for covered damages or losses under an insurance policy. Policy limits may be expressed as a single limit or as split limits, with different maximums for each. For example: a $500,000/$1,000,000 split limit policy might have a maximum of $500,000 per occurrence for property damage and a maximum of $1,000,000 per occurrence for bodily injury.
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Why Do Policy Limits Matter?
They matter because they determine how much protection you have in the event of a covered loss. If the damages or losses you incur exceed your policy’s limits, you will be responsible for paying the difference out of pocket. For this reason, it’s important to understand your policy limits and make sure they provide adequate protection for your needs.
How Are Policy Limits Determined?
When you purchase an insurance policy, you’ll need to decide on the policy limits that are right for you. Your decision should be based on a number of factors, including the value of your assets, the amount of risk you’re willing to take, and your budget. It’s important to work with an experienced insurance agent or broker who can help you understand your options and help you in making the best decision for your needs.
What Happens if a Claim Exceeds Your Policy Limits?
If you’re concerned about the possibility of a large claim, you may want to consider purchasing an umbrella policy, which provides additional liability protection above and beyond your regular policy limits.
Policy limits are an important consideration when you purchase any type of insurance policy. Make sure you understand your policy limits and purchase adequate coverage for your needs. If you have any questions, talk to your insurance provider.
What Is a Policy Limit Demand?
If you have a claim that exceeds your policy limits, your insurance company may send you a policy limit demand. This is a notice that informs you of the maximum amount they are willing to pay on your claim. It’s important to understand that you are not required to accept the policy limit demand. If you believe the amount offered is too low, you can negotiate with your insurance company for a higher settlement. An experienced attorney can help you navigate the claims process and negotiate with your insurance company to get the best possible outcome for your claim.
The Bottom Line
Policy limits are an important consideration when you purchase any type of insurance policy. Make sure you understand your policy limits and purchase adequate coverage for your needs. If you have any questions, be sure to speak with your insurance agent or broker.
More Resources for Your Company
From law firms to startups to small businesses, we work alongside your company to customize coverage for the areas of risk you face. If you’re looking for additional support and resources, we’ve got you covered there too. Check out these fan-favorite articles and data deep dives making waves in the industry:
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