Overall policy limits do not always apply uniformly. A sub-limit is a lower maximum amount of coverage that applies to a specific category of loss, location, or peril within a larger policy limit. Once the sub-limit is exhausted, no further payment is available for that category even if the overall limit remains.

Flood, earthquake, mold, and certain liability exposures commonly carry sub-limits. The device allows insurers to offer broad coverage while containing accumulation risk on especially volatile or catastrophic perils. Policyholders must read the declarations and endorsements carefully to identify every sub-limit that applies.

When a loss hits a sub-limit, the insured may face a significant uninsured gap. Higher sub-limits or separate excess coverage can close that gap at additional cost. Clear scheduling of sub-limits on the declarations page reduces later disputes about available coverage.

• Lower coverage ceiling for a specific loss type
• Applies inside a higher overall policy limit
• Common for catastrophe and specialty exposures
• Can create uninsured gaps if overlooked