Sublimit

What is sublimit?

A sublimit is a specific cap within an insurance policy that applies to certain types of losses. It’s part of the original limit, not extra coverage. Sublimits can be expressed as a dollar amount or a percentage of the total coverage of your business insurance.

How does a sublimit work?

To understand their sublimits, business owners should read their policy, particularly the coverage sections and statements page. The statements page usually outlines the total limits and any sublimits. Coverage sections detail what’s covered and to what extent.

Businesses can add extra coverage, known as “riders”, to increase sublimits in high-risk areas.

What happens if a claim exceeds a sublimit?

If a claim exceeds the sublimit, the insurance only covers up to the sublimit, and the policyholder is responsible for the rest. This limitation on the insurer’s responsibility can result in lower premiums for policyholders. 

For instance, in a Business Owner’s Policy (BOP), there might be a sublimit for electronic data coverage. If the total coverage is $500,000, but there’s a loss of electronic data, the policy may only pay a maximum of $50,000 for that loss.

If a sublimit is too low, businesses can look into policies with larger sublimits, like cyber liability or professional liability insurance for electronic data.

Common types of sublimits in small business insurance policies

Sublimits are usually set for a few specific areas of coverage in small business insurance policies:

• Cyber liability: Data breach, cyber extortion and regulatory defense and penalties.
• Property damage: Certain types of property damage, such as damage to outdoor signs, glass breakage or landscaping.
• Specific perils: Floods, earthquakes, or named storms.
• Theft: Theft of valuable items like cash, securities or electronic equipment.
• Business interruption: Lost income and additional expenses due to business interruption.
• Employee dishonesty: Losses due to fraudulent or dishonest acts by employees.
• Punitive damages: Damages exceeding the simple compensation.
• Professional liability: For businesses offering professional services, there might be sublimits on claims related to errors and omissions or negligence.

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