Is the policyholder liable for any losses that exceed the insured amount?

The correct answer, which suggests that a policyholder is always liable for any losses that exceed the insured amount, reflects a fundamental principle of property insurance. When a policyholder purchases an insurance policy, they select a coverage limit that represents the maximum amount the insurer will pay for covered losses. If the losses incurred exceed this limit, the policyholder must cover the additional costs out-of-pocket.

This principle underscores the importance of selecting appropriate coverage limits based on the value of the insured property. It ensures that individuals are aware they bear the financial responsibility for any losses beyond their insurance coverage, which can lead to significant financial repercussions if not adequately planned for. As such, understanding the limit of liability in an insurance policy is crucial for policyholders.