What consequence may arise if a policyholder exceeds their policy limit?

When a policyholder exceeds their policy limit, the primary consequence is that the policyholder may receive nothing for the loss beyond the specified limits of their policy. Insurance policies have defined coverages and limits, which establish the maximum amount the insurer will pay for a covered loss. If a loss occurs that exceeds these limits, the policy will not provide reimbursement for the excess amount.

This means that if the incurred damages surpass the coverage limit, the policyholder is responsible for the excess cost. For example, if a homeowner's insurance policy has a limit of $250,000 and the damage amounts to $300,000, the insurer will only pay up to $250,000, leaving the homeowner to cover the remaining $50,000 out of their pocket.

The other options do not accurately reflect the implications of exceeding policy limits. The insurer is not obligated to cover the entire loss (A), nor can the policyholder automatically increase the coverage (C) without going through the appropriate processes to modify their policy. Additionally, grace periods are typically not applicable to increasing coverage limits in such scenarios (D). Therefore, the most accurate consequence is that the policyholder may receive nothing for the loss beyond what is covered within their policy limits.