Sub-limit

A sub-limit is a specific dollar cap on a particular category of loss within a broader policy limit. The sub-limit is lower than the overall coverage limit and applies before the broader limit. It is one of the most common sources of customer surprise on a claim.

The clearest example is the jewelry sub-limit on a standard homeowners policy. The policy might have 100,000 dollars of personal property coverage overall, but a sub-limit of 1,500 to 2,500 dollars specifically for theft of jewelry. So if your engagement ring is stolen and it is worth 8,000 dollars, the policy pays the sub-limit of 1,500 to 2,500 (depending on your specific policy) regardless of the broader personal property coverage. Scheduled articles coverage or a standalone jewelry policy is the way to get full appraised-value coverage.

Other common sub-limits on homeowners policies: cash and currency (typically 200 to 500 dollars), firearms theft (typically 2,000 dollars), business property kept at home (typically 2,500 dollars), trees and shrubs (typically 5 percent of dwelling coverage), water backup (often a 5,000 dollar default that needs to be increased by endorsement), mold (sometimes capped at 10,000 dollars), and identity theft (often 25,000 dollars when included).

Auto policy sub-limits exist too: personal property in the vehicle (typically not covered or capped at 200 dollars), audio equipment after-market installations (capped at 500 to 1,000 dollars), and electronic equipment that is permanently installed.

Commercial policies often have sub-limits on accounts receivable, valuable papers, outdoor signs, and computer fraud.

The takeaway: when reviewing a policy, look for sub-limits on the things you actually own that have value. A Coverage Review specifically checks for sub-limit gaps against your actual exposures.