What do special limits of liability refer to?

Special limits of liability are internal limits imposed on certain classes of property within an insurance policy. These limits specify the maximum amount that will be paid for specific types of property or specific categories of claims, irrespective of the overall coverage limits of the policy. For instance, a homeowner’s policy might have special limits of liability for personal property like jewelry, electronics, or collectibles, thereby capping the payout for these types of items even if the overall policy limit remains intact.

This concept helps insurers manage their exposure to loss by placing constraints on higher-risk items or categories that may be more prone to claims or that have potential for higher value. Understanding this distinction is critical for policyholders in recognizing how much coverage they actually have for their possessions, and it assists in making informed decisions regarding additional endorsements or increased coverage if necessary.