An insurance limit is the maximum amount of money an insurer will pay toward a covered claim. The higher your coverage limit, the higher your premium may be. Limits often apply to different types of coverage within a policy. For example:

Homeowners insurance

You'll likely want to consider a number of factors when choosing your homeowners insurance coverage limits. These may include:

The amount it may cost to rebuild your home at current construction costs (dwelling coverage)
The value of your belongings (personal property coverage)
The amount of liability coverage that may assist you if you're found legally responsible for a guest's injuries or damage to someone else's property

Your insurer can help you review what specific types of coverage may be available to fit your situation.

Auto insurance

Typical auto insurance policies include separate limits for different types of coverage, such as:

Auto liability coverage: Each state sets minimum liability limits that all drivers are required by law to purchase. However, you may want to consider increasing your liability insurance coverage limits to help protect yourself from the unexpected.
Uninsured/underinsured motorist coverage: Just like auto liability coverage, some states require these coverages and set minimum coverage limits you must purchase. You may be able to increase your coverage by selecting higher coverage limits.
Personal injury protection (PIP): In "no-fault" states, this coverage may be required or optional. Where PIP is required, states set mandatory coverage limits drivers must purchase. You may be able to purchase higher coverage limits.
Medical payments coverage: This coverage is typically optional. You may be able to select your coverage limits, up to a certain amount specified by your insurer.
Comprehensive coverage: Your comprehensive coverage limit is typically the actual cash value (i.e., the depreciated value) of your car.
Collision coverage: Your collision coverage limit is typically the actual cash value of your vehicle.