What Are Aggregate Insurance Limits?

Liability insurance coverage amounts are typically expressed by stating a "per occurrence" limit. Liability policyholders should be aware that most liability policies also have aggregate limits.

Definition

An aggregate limit is the most a liability insurance policy will pay for all claims made during a policy term, regardless of the number of claims made.

Purpose

An aggregate limit is designed to cap an insurance company's exposure to losses caused by a policyholder in a single policy term (usually one year). This allows the insurance company to more accurately calculate premiums to cover claims payments.

Effects

If the total of all claims made against a policyholder exceed the aggregate limit, the policyholder will be responsible for damages and legal defense costs above this limit.

Per-Occurrence Limits

Per-occurrence limits are not reduced by the aggregate limit. If you have a $1 million per-occurrence limit and a $2 million aggregate limit, and you incur three $700,000 claims, the first two claimants will still receive $700,000 each. The third claimant would only receive $600,000 from your policy.

Raising Aggregate Limits

Raising your aggregate limit will help provide protection against multiple claims without significantly adding to your premiums.

References

• CourierInsurance.com: When is $2 Million Less Than $1 Million?