What is a policy limit?

A policy limit is the maximum amount of money that a policyholder’s insurance company is obligated to pay for a given claim under the terms of their insurance policy. Policy limits are usually set by the policyholder and the insurance company at the time of purchase, and they will vary depending on the type and amount of coverage the policyholder chooses. In California, policy limits are regulated by the California Department of Insurance (CDI). The CDI establishes minimum standards for policy limits throughout the state to ensure that policyholders are adequately protected from large losses. For example, auto insurance policies must have a minimum of $15,000/$30,000 for bodily injury coverage and $5,000 for property damage. In some cases, policyholders can choose to purchase additional coverage or higher policy limits for greater protection.

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What is a policy limit?

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