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Solve a limit question by identifying the limit’s unit (per person, per occurrence, per accident, aggregate, or item), matching the claimant or loss to that unit, subtracting any applicable deductible, and checking remaining aggregate capacity.
- Do not confuse a policy limit with proven damages, legal liability, replacement cost, or the insured’s total out-of-pocket exposure.
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Limits are caps with labels. The label tells you what event or claimant the number applies to. Before doing arithmetic, underline whether the prompt says per person, per accident, per occurrence, per policy period, or per item. Then identify whether the loss is bodily injury, property damage, or first-party property. Similar dollar amounts can belong to completely separate buckets.
Solve a limit question by identifying the limit’s unit (per person, per occurrence, per accident, aggregate, or item), matching the claimant or loss to that unit, subtracting any applicable deductible, and checking remaining aggregate capacity. Do not confuse a policy limit with proven damages, legal liability, replacement cost, or the insured’s total out-of-pocket exposure.
- Name the coverage or concept
- Do not mix policy forms, statutory benefits, and third-party liability.
- Find the trigger
- Circle the person, property, date, cause, limit unit, or work status that changes the result.
- Use only supported terms
- Policy language and current Texas law control; do not invent a missing clause or benefit.
- Show the work
- For calculations, write each arithmetic step and apply the right aggregate or sublimit.
Use this calculation order: establish the covered loss and applicable coverage part; compute covered damages or value under the stated basis; apply per-person or per-item caps; add claims subject to a shared occurrence or accident maximum; subtract a deductible where the wording places it; then compare payment with remaining aggregate capacity. A combined single limit works differently from split limits.
A method you can reuse
Exam questions often imply that a limit is the amount paid. It is only the ceiling. Payment can be smaller because the covered loss is smaller, a deductible applies, valuation differs, an exclusion applies, or an aggregate has been partly used. An insured’s legal liability can also exceed available insurance.
Read the question stem once for the broad topic, then again for the operative facts. Build a short chain: stated facts → governing definition or rule → coverage category → limit or result. If your answer depends on a fact that the scenario never gives, identify that gap. On an exam, the best answer usually follows the stated assumptions; in a real claim, the issued policy and evidence must be reviewed.
| Checkpoint | What to identify | Trap to avoid |
|---|---|---|
| Subject | Who is insured, injured, named, or legally responsible? | Assuming every person has the same status. |
| Trigger | What event or wording activates the rule? | Remembering a rule but missing its factual trigger. |
| Scope | Which form, coverage, statute, and period apply? | Importing terms from a different product or law. |
| Math/result | Which cap, deductible, or remaining amount applies? | Adding separate benefits when the prompt provides one shared aggregate. |
Worked practice questions
Question 1
One person has $42,000 in covered bodily injury damages. The policy’s split limits are $30,000 per person / $60,000 per accident. No prior payments or other issues apply. What is the maximum for this claimant?
| Choice | Reasoning |
|---|---|
| A. $30,000, because the per-person cap applies even though the accident cap is higher. | Correct. The applicable claimant-specific ceiling is $30,000. Since damages are $42,000, the contractual maximum for this person is the lower $30,000 figure, subject to the policy and other facts. |
| B. $42,000, because the damages are below the per-accident amount. | Incorrect. A claimant cannot use unused per-accident capacity to exceed the per-person cap. |
| C. $60,000, because it is the largest BI number. | Incorrect. The $60,000 number is the aggregate BI cap for one accident, not a single claimant’s limit. |
| D. $18,000, because the difference between damages and the cap is paid. | Incorrect. $18,000 is the amount above the cap, not a payment due. |
Answer: A. The decisive reasoning is: The applicable claimant-specific ceiling is $30,000. Since damages are $42,000, the contractual maximum for this person is the lower $30,000 figure, subject to the policy and other facts. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 2
Three claimants have covered BI damages of $20,000 each under limits of $25,000 per person and $50,000 per accident. What is the total maximum available?
| Choice | Reasoning |
|---|---|
| A. $50,000 total; each individual claim is below $25,000, but combined damages exceed the accident cap. | Correct. Each person’s $20,000 claim is below the $25,000 per-person cap, but $60,000 combined exceeds the $50,000 per-accident aggregate. Total insurer payment cannot exceed $50,000. |
| B. $60,000 because each person is below the per-person limit. | Incorrect. The individual caps do not override the aggregate cap. |
| C. $25,000 total because that is the per-person limit. | Incorrect. The per-person limit is not the total cap for all injured people. |
| D. $75,000 because the accident limit applies to each claimant. | Incorrect. The per-accident limit is shared among the accident’s BI claims, not multiplied by claimant count. |
Answer: A. The decisive reasoning is: Each person’s $20,000 claim is below the $25,000 per-person cap, but $60,000 combined exceeds the $50,000 per-accident aggregate. Total insurer payment cannot exceed $50,000. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 3
A covered dwelling loss is valued at $18,500 on the applicable settlement basis. The policy has a $15,000 sublimit and a $2,000 deductible that applies to the same loss. Assuming the sublimit is applied before the deductible, what is the payment?
| Choice | Reasoning |
|---|---|
| A. $13,000. | Correct. Cap the covered amount at the $15,000 sublimit, then subtract the $2,000 deductible: $15,000 − $2,000 = $13,000. The prompt specifies the sequence to remove ambiguity. |
| B. $16,500. | Incorrect. $16,500 subtracts the deductible from the uncapped $18,500 and ignores the sublimit. |
| C. $15,000. | Incorrect. This is the maximum before applying the stated deductible, not net payment. |
| D. $1,500. | Incorrect. This subtracts the sublimit from the loss and disregards how a coverage cap works. |
Answer: A. The decisive reasoning is: Cap the covered amount at the $15,000 sublimit, then subtract the $2,000 deductible: $15,000 − $2,000 = $13,000. The prompt specifies the sequence to remove ambiguity. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 4
A personal property limit is $40,000, but a special limit caps one category of jewelry theft at $1,500. The covered stolen jewelry is valued at $4,000. What is the category maximum before other policy adjustments?
| Choice | Reasoning |
|---|---|
| A. $1,500, because the special limit narrows the broad personal property limit for this category and cause. | Correct. A special limit commonly sets a smaller ceiling for a specified item category or loss cause. Apply it only if its wording and trigger fit, then consider deductible and valuation. |
| B. $4,000 because the item’s value is below the overall $40,000 limit. | Incorrect. The overall personal property limit does not displace a more specific sublimit. |
| C. $40,000 for the jewelry alone. | Incorrect. The broad limit applies to covered personal property as a whole and is not an item-level grant. |
| D. Zero because a special limit always means exclusion. | Incorrect. A sublimit is not necessarily an exclusion; it can provide limited coverage. |
Answer: A. The decisive reasoning is: A special limit commonly sets a smaller ceiling for a specified item category or loss cause. Apply it only if its wording and trigger fit, then consider deductible and valuation. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 5
A policy has a $100,000 aggregate limit for a category. Prior covered payments in the policy period total $72,000. A new otherwise covered claim is $45,000. What is the remaining maximum under that aggregate?
| Choice | Reasoning |
|---|---|
| A. $28,000, because $100,000 − $72,000 leaves $28,000 of capacity. | Correct. The remaining capacity is $28,000. If the policy applies one aggregate to these claims, the new claim cannot increase that aggregate beyond its stated maximum. |
| B. $45,000, because each new claim restarts the aggregate. | Incorrect. Aggregates typically operate over a defined policy period or category, not as a fresh limit for each claim. |
| C. $72,000, because that is what has already been paid. | Incorrect. Prior payment reduces remaining capacity; it does not create the amount still available. |
| D. $100,000, because aggregate limits never reduce. | Incorrect. The remaining aggregate changes as payments are made, subject to the policy’s reset and period language. |
Answer: A. The decisive reasoning is: The remaining capacity is $28,000. If the policy applies one aggregate to these claims, the new claim cannot increase that aggregate beyond its stated maximum. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 6
One occurrence causes $35,000 damage to a fence and $22,000 to a vehicle. A $50,000 per-occurrence property liability limit applies to covered damage to others. What is the maximum total available before allocation?
| Choice | Reasoning |
|---|---|
| A. $50,000 total, because both property claims arise from the same occurrence and together are $57,000. | Correct. Add the covered property claims arising from the same occurrence: $35,000 + $22,000 = $57,000. The shared $50,000 occurrence limit caps total payment, before considering allocation or settlement. |
| B. $35,000 because the largest claimant controls. | Incorrect. The occurrence limit applies to the total claims, not only the largest item. |
| C. $57,000 because each damaged property gets a separate occurrence limit. | Incorrect. Multiple damaged items do not automatically create multiple occurrences. |
| D. $22,000 because only the vehicle is property. | Incorrect. Both a fence and vehicle are property; the scenario states one occurrence. |
Answer: A. The decisive reasoning is: Add the covered property claims arising from the same occurrence: $35,000 + $22,000 = $57,000. The shared $50,000 occurrence limit caps total payment, before considering allocation or settlement. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 7
A liability policy has a $300,000 single-occurrence limit. The insured is found liable for $240,000 bodily injury and $90,000 property damage in that occurrence. What does the limit indicate?
| Choice | Reasoning |
|---|---|
| A. Total covered damages are $330,000, so the insurer’s payment is capped at $300,000, subject to policy terms and allocation. | Correct. A combined single limit applies once to the covered occurrence as stated. Combined damages total $330,000; maximum insurance available is $300,000, while allocation depends on settlement and terms. |
| B. Pay $300,000 for BI plus another $300,000 for PD. | Incorrect. A single limit is not repeated separately for BI and PD. |
| C. Pay only $240,000 because BI always consumes a combined limit first. | Incorrect. The prompt supplies no priority rule allocating all coverage to BI. |
| D. The insured has no liability above $300,000. | Incorrect. The limit caps insurance, not the insured’s underlying legal responsibility. |
Answer: A. The decisive reasoning is: A combined single limit applies once to the covered occurrence as stated. Combined damages total $330,000; maximum insurance available is $300,000, while allocation depends on settlement and terms. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Question 8
A covered loss is $7,200, the applicable deductible is $1,000, and the remaining policy limit is $5,500 after prior payments. What is the maximum new payment?
| Choice | Reasoning |
|---|---|
| A. $5,500; the post-deductible amount is $6,200, but only $5,500 limit remains. | Correct. First subtract the deductible: $7,200 − $1,000 = $6,200. Then apply remaining capacity of $5,500, which is lower. Payment cannot exceed that remaining limit. |
| B. $6,200. | Incorrect. This ignores that only $5,500 of limit remains. |
| C. $7,200. | Incorrect. This ignores both the deductible and remaining limit. |
| D. $1,000. | Incorrect. The deductible is the insured’s retained amount, not the insurer’s payment. |
Answer: A. The decisive reasoning is: First subtract the deductible: $7,200 − $1,000 = $6,200. Then apply remaining capacity of $5,500, which is lower. Payment cannot exceed that remaining limit. Record that rule or calculation in your own words, then try a new question with one fact changed. That is the quickest way to tell whether you learned the method or merely remembered this item.
Use the explanation to improve the next attempt
After solving a question, state the governing concept before looking at the answer choices again. Then eliminate each distractor for a specific reason: wrong form, wrong coverage part, wrong claimant, wrong limit unit, missing trigger, or unsupported assumption. This avoids a common pattern where a choice sounds familiar and is selected even though it answers a neighboring question.
For numerical items, keep the order visible. Determine the covered amount first, apply any category or per-person cap, combine claims that share a limit, subtract the deductible in the order supplied by the prompt, and compare the result with remaining aggregate capacity. Do not round, pool, or create new limits unless the question says to do so. A limit is not necessarily the amount paid.
For Texas statutory questions, name the code chapter or section that supplies the rule, and check the effective text if timing matters. Statutes have scope and exceptions; one fact pattern may raise both policy and legal questions. Treat any missing policy wording as a limitation on what can be concluded.
Common questions
Does an insurance limit cap an insured’s legal liability?
No. It caps the insurer’s contractual payment under the applicable coverage. The insured can remain liable for covered damages above available limits, subject to law and collection.
Do I subtract a deductible before or after applying a sublimit?
Follow the policy wording and the question’s stated assumptions. If the sequence is unstated and changes the result, identify the ambiguity rather than assume a universal calculation order.
What does “per occurrence” usually mean in a limit question?
It is a shared cap for covered claims arising from one occurrence as defined by the contract. Multiple injured people or damaged items may share it, alongside separate per-person or category limits.