What is likely to happen if a claim exceeds the coverage limit?

When a claim exceeds the coverage limit, the insured is typically responsible for paying the excess amount. Insurance policies contain specified limits that dictate the maximum amount the insurer will pay for a covered loss. If a claim amount surpasses these limits, the insurer will only cover up to the policy limit, leaving the insured to cover any costs beyond that amount.

For instance, if a homeowner has a policy with a limit of $100,000 and suffers damages costing $150,000, the insurer will pay the first $100,000, and the homeowner will need to pay the remaining $50,000 out of pocket. This principle is a fundamental aspect of how insurance policies function, emphasizing the responsibility of policyholders to understand their coverage limits and be prepared for any financial exposure that might arise from claims exceeding those limits.