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  • Writer's pictureMax Factor Law

What Are Policy Limits?

Updated: Aug 18, 2022

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What are policy limits?

In short, a policy limit is the maximum amount your insurance provider agrees to pay (per event) towards substantiated property damage insurance claims. For example: If your homeowner insurance policy limit is $350,000, this is the maximum amount you could possibly receive under one property damage insurance claim. Some policies set policy limits per year and some per length of the contract (if longer than a year).

Other terms to be aware of:

Aggregate limits: the total amount your insurance company will pay to settle your claims. This means that any loss over the amount of this limit would be your responsibility.

Sub-limits: separate limits for add-on items to your homeowner policy, such as jewelry.

Who sets homeowner insurance policy limits?

Policy limits are determined by several factors. The main factor depends on the way your policy is set-up to pay out:

  • Actual Cash Value (ACV is the amount needed to repair or replace an item, less depreciation. For example, your insurance company would deduct for the age and condition of a 17-year-old roof with a 20-year life expectancy. In this scenario, you have used 17 out of 20 years expectancy. You would be paid for the remaining three years value.)*


  • Replacement Cost (Replacement Cost is the amount needed to repair or replace your damaged property with materials of similar kind and quality, without deducting for depreciation (the decrease in the value of your home or personal property due to normal wear and tear).*

Homeowners Tool Kit

*To learn more about the difference between Actual Cash Value and Replacement Cost insurance policies, please visit the Homeowners Tool Kit . Examine real life scenarios to gain a better understanding of the outcomes for each type of homeowner insurance policy and their limits.

Contact An Insurance Claim Attorney For Free Claim Review

Insurance policies can seem like trying to read a foreign language. Luckily, Max Factor Law has over 25 years experience in assisting Floridian's navigate homeowner property damage insurance claims. If you're experiencing trouble understanding your policy, the insurance claims process, or your insurance provider isn't holding up their end of the deal contact Max Factor Law at (850) 577-1699 and we will gladly review your homeowners property damage insurance claim situation free of charge.

*Information provided was taken from the Florida CFO's Homeowners Tool Kit.


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