Chunking sets a ceiling on answer quality at ingest time. A chunk is a few hundred tokens embedded as its own retrievable unit, and retrieval can only rank chunks that exist, so a policy split across two chunks answers no question on its own (The AI Engineer). Most teams solve this with overlap: the tail of each chunk is copied onto the head of the next, usually at 10 to 20 percent of chunk size (The AI Engineer).
Overlap fixes sentences that straddle a cut. It does not fix claims that depend on a qualifier sitting in a different paragraph. Marketing copy produces this failure constantly. A bold number in one paragraph ("cuts setup time by half") is often governed by a condition two paragraphs earlier ("for teams already on the pro tier") and a disclaimer three paragraphs later ("results vary by catalog size"). Overlap is blind to both because neither sits near the cut boundary.
The damage shows up as a specific error type rather than a vague "bad answer". Splunk's write-up of common RAG failures lists "not extracted (FP4)": the answer is in the context, but noise or conflict hides it, and "incomplete (FP7)": accurate but omits information from context (Splunk). A mid-claim hit with no qualifier is FP7 by construction. The chunk is relevant, ranks well, and still cannot support a defensible citation.
This is the next decision after chunk size, and it matters as much. Chunk size decides what can be retrieved. Expansion decides what the model actually reads.



