Texas All Lines Adjuster Practice Test

What can happen if an insurance claim exceeds the policy limits?

1. The policyholder is responsible for the excess amount

2. The insurer will cover any excess costs

3. The claim will be denied entirely

4. The excess amount will be billed to the government

The correct answer is: The policyholder is responsible for the excess amount

When an insurance claim exceeds the policy limits, the policyholder becomes responsible for the excess amount. This situation arises because insurance policies have defined limits that represent the maximum amount the insurer will pay for covered losses. If the costs associated with a claim surpass these predetermined limits, the insurer is not obligated to cover any amount beyond what is specified in the policy. This highlights the importance of understanding your coverage and, if necessary, purchasing additional coverage or riders to ensure greater financial protection and avoid potential out-of-pocket expenses. In many cases, policyholders may also seek to negotiate, but ultimately, any excess costs will remain their responsibility.