MU Extension MU Extension       University of Missouri    ●    Columbia    ●    Kansas City       Rolla     ●    St. Louis - Money Matters - Consumer Action


Finance Quick Answers



Are there any limits on the liability of an insurance provider?

Several factors work together to limit an insurer's liability:

  • Insurable interest (an insurance contract is valid only if the policyholder has a financial interest in the person or property covered by the insurance)
  • Actual cash value (indemnification is governed by the notion that only the actual dollar loss is reimbursed - the amount of money needed to replace or damage property)
  • Other insurance (prevents multiple claims to different insurance companies for the same incident, eliminating the possibility of overpayment for the loss)
  • Face amount (sets a maximum amount that the insurer is required to pay the insured)
  • Co-insurance (specifies the sharing of costs between the insured and the insurer - an example is a health insurance policy with an 80/20 co-insurance clause, meaning that the insurer pays 80 percent of the medical bills and the insured pays 20 percent up to a maximum amount)
  • Subrogation (if your loss is caused by someone's negligence, you get reimbursed, or indemnified, but your insurance company has the right to sue the guilty party to recoup the loss)




Brenda Procter, M.S.,  Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri-Columbia










If you'd like to learn more about this and other personal finance topics, the University of Missouri offers 'Personal & Family Finance,' a correspondence course, through the Center for Distance and Independent Study (800-609-3727). Information about this course is available at





Can't Find Your Question Here? Try Searching Our Quick Answer Knowledge Base

Last update: Sunday, July 20, 2008




University of Missouri logo links to

Site Administrator: 
Copyright  ADA  Equal Opportunity

MissouriFamilies is produced by the College of Human Environmental Sciences,
Extension Division, University of Missouri-Columbia