Aggregate limit

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.

For example, if your general liability policy has a $2 million aggregate limit and you file two claims worth $1 million each, your coverage is maxed out for that policy term. Any further claims would be your responsibility.

An aggregate limit acts like a yearly cap on how much your insurance company will pay for all covered claims combined. Each time you file a claim and the insurer pays out that amount is subtracted from your total limit.

Every time your insurer pays for a claim—whether for property damage, injuries, or other covered losses—it reduces your remaining aggregate limit.

Even legal defense costs may count toward this limit, depending on your policy wording. That’s why it’s important to know whether your policy lists defense costs inside (included within) or outside your aggregate limit.

If you have a few smaller claims in one year, you could reach your cap faster than you expect. Once you do, your insurer stops paying for new claims until your next policy period begins.

Your aggregate limit usually resets at the start of each new policy year.

Some policies also include sub-aggregates. For example, a products-completed operations aggregate for contractors, or a per-location aggregate for businesses with multiple locations.

Your policy may list both an aggregate limit and a per-occurrence limit.

• The per-occurrence limit is the most your insurer will pay for any single claim.
• The aggregate limit is the total they’ll pay for all claims combined during the policy period.

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.

So if your policy says “$1 million per occurrence / $2 million aggregate,” you could have two separate $1 million claims covered in the same year. However, a third claim would exceed your aggregate limit.

There are several policies that function under aggregate limits, while there also some that don't. Here's a closer look at the different policy types for top coverages:

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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