For various types of insurance, an aggregate limit is the maximum amount of money an insurer will pay for all your covered losses during the policy period, typically one year.
What is an aggregate limit of liability?
If you suffer a loss (e.g., damage to your business property or a customer injury on your premises), you must file a claim with your insurer to receive benefits under your small business insurance policy. The maximum amount of money your insurer will pay for all the claims you file during the policy period, typically one year, is known as your aggregate limit.
Aggregate limits are distinct from per-occurrence (or per-claim) limits. These refer to the maximum amount an insurer will pay for a single claim or incident. When the value of your total claims exceeds your aggregate limit, you will have to pay the difference out of pocket.
Business insurance policies that have aggregate limits
Many forms of insurance have aggregate limits, including professional liability insurance (also known as errors and omissions insurance) and general liability insurance. With general liability insurance, aggregate limits are known as general aggregate limits.
Why are aggregate limits necessary?
Aggregate limits are a policy feature that meets the needs of both insurance customers and insurance carriers.
They meet your needs because they give you the ability to customize your insurance to reflect your risk exposure and budget. If you face modest risks and have a limited budget, purchasing a policy with lower limits will keep you safe, while lowering your premiums. If you have substantial risks and a sufficient budget, you can increase your limits to provide more protection for a higher premium.
Insurance companies use aggregate limits to reduce their exposure to catastrophic customer losses. This allows them to keep their premiums affordable while making sure their finances remain strong.
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