The aggregate limit is the maximum amount your insurance company will pay for all covered claims filed during your policy period.
What is an aggregate limit?
Your insurance policy’s aggregate limit spells out the maximum amount of money the insurer will pay for all covered losses during your policy period. After you reach your aggregate limit, the insurance company will not cover any additional claims made in that period, which is typically one year.
Examples of aggregate limits
For example, your business insurance policy’s aggregate limit is $5 million. If you filed four claims in one term that cost $1 million each ($4 million total), you would be under your aggregate limit. In that case, the insurance company would continue to cover any additional claims until the payouts depleted the remaining $1 million for that period.
However, say you submitted three claims in the same period, each costing $2 million ($6 million total). The insurance company would cover your claims up to the $5 million aggregate limit. But because the claims exceeded the $5 million aggregate limit, you would be responsible for $1 million in out-of-pocket costs.
Business insurance policies that have aggregate limits
Can I choose my aggregate insurance limit?
Yes, when you purchase a business insurance policy, you can select an aggregate limit based on your business’s budget and level of risk.
The higher the limit, the more expensive your premium will be. But for businesses that face high risk, a high aggregate limit could save you significant money over time.
What claims count toward the aggregate limit?
Every claim that is covered by your business insurance policy counts toward your aggregate limit. That includes bodily injury, property damage claims, and more. It doesn’t matter how large or minor the claim is.
Say your insurance aggregate limit is $1 million. In your policy period, you could file two claims each worth $500,000 to meet your aggregate limit. You could also file 10 claims each worth $100,000 before reaching your limit.
The payout value, not the number of claims submitted, is what the insurance company uses to determine when you’ve reached your limit.
Why are aggregate limits important?
If your business is high risk, a high aggregate limit will provide enough coverage in the event that you need to file multiple costly claims per policy period. If your business faces little risk, you can set a lower aggregate limit and save money on your insurance.
For the insurance company, setting a general aggregate limit reduces their risk of having to reimburse policyholders for multiple high-cost losses in the same year. By setting a limit on payouts, the insurance provider can keep their cost relatively low to encourage business owners to purchase a policy.
Aggregate limit vs. per occurrence limit
Most business insurance policies have two limits: an aggregate limit and a per occurrence limit. Your aggregate insurance limit is the maximum amount of money your insurance company will pay to cover all of your claims in a given time period. Your per occurrence limit is the highest amount of money insurance will pay to cover a single claim.
Aggregate limits for per occurrence policy vs. per claim policy
Your insurance policy may be labeled as a per occurrence policy or per claim policy. These are two separate types of policies that reimburse policyholders very differently. The aggregate insurance limits are also different for these policies.
Aggregate limits for a per occurrence policy
With a per occurrence policy, insurance pays for every claim your business files that results from a single event. Even with grounds to file multiple claims, the insurance company will treat the event as one claim. This type of insurance requires only one deductible.
If you have per occurrence insurance, your aggregate limit gets reset at the beginning of every policy term. It doesn’t matter if you reached your limit in the previous period.
Aggregate limits for a per claim policy
With a per claim or claims-made policy, insurance will pay for every loss individually that results from one incident. For example, if an office fire destroyed valuable IT equipment and injured employees, that would be considered two separate claims. A per claim policy requires the policyholder to pay a deductible for every claim.
If you have per claim insurance, your aggregate limit never resets. When you purchase insurance, you set your aggregate limit that stays the same for the lifetime of your policy.
When you reach your aggregate limit, you’ll have to increase the limit in order for the insurance company to continue covering your business.
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