Your commercial general liability insurance, or CGL, is designed to protect you while limiting the insurer's risk in worst-case scenarios. The general aggregate limit in your CGL insurance is an example of that balancing act. It places a ceiling on the insurer's obligation to pay for bodily injury, property damage, medical expenses and lawsuits that may occur to a business during the policy's term. As with other kinds of insurance, the higher the coverage the greater the premium.
Defining the Aggregate Limit
The general aggregate limit on a CGL insurance policy defines the total amount the insurer will pay during a single policy period, usually a year. This means that coverage will pay for every claim, loss and lawsuit that involves a policyholder, until it reaches that aggregate limit. That might represent a single large claim, or multiple smaller ones. However, the general aggregate limit can be reinstated in certain circumstances.
Defining the Coverage
The general aggregate limit on your CGL policy protects you against a broad range of risks, as long as they're not explicitly excluded in your policy language. For example, a policy might damages that occur because your premises haven't been maintained properly. You're also usually covered for damages that rise out of your normal business activities, such as vehicle accidents when you're a courier.
Once the aggregate limit has been reached for the current policy term, it typically doesn't reset until after the next renewal. However, some insurance companies may offer an optional endorsement which can reinstate the aggregate limit once it has been exhausted. This endorsement increases the cost of your policy premium, whether you use it or not, but can provide a useful safety net.
Pushing the Limits
Once the general aggregate limit has been reached for a policy, the benefits will end for the current policy term. This means that any litigation costs that occur or claims that are made after the aggregate limits have been exhausted will need to be paid by the policyholder. You can minimize this risk by purchasing a policy with a higher general aggregate limit.
The typical aggregate limit for a general liability policy is $1 million. However, many insurance companies may offer a higher general aggregate limit amount. The aggregate limit also comes with a per occurrence limit that is typically $1 million. The per occurrence limit is the most that a general liability insurance policy will pay for any one claim. Keep in mind that when the aggregate limit is increased, the per occurrence limit will generally stay the same.
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