What Does It Mean to Get an Aggregate Limit

If you’ve ever taken out a loan and seen an “aggregate limit” larger than the limit you requested, you might be confused. What’s an aggregate limit? How is it different from your regular limit? Let’s take a look at these questions.

What is an Aggregate Limit?

An aggregate limit is a total amount the insurance company is willing to pay out during the policy period. If you have a very unfortunate year and somehow manage to reach the aggregate limit, the insurance company will not pay anything out for future claims, and the policy is effectively over.

What’s the difference between an Aggregate Limit and a Per Occurrence Limit?

An aggregate limit is usually twice as much as the per-occurrence limit. The per-occurrence limit is what most people think of when they discuss a policy’s limit.

An “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful condition. General liability policies insure liability for bodily injury (BI) or property damage (PD) that is caused by an occurrence.” Anything you can file a claim for is an occurrence.

So the per occurrence limit is how much your insurance company will pay out for anyone loss. If you have a $1 million dollar per occurrence limit, the maximum amount available for any one occurrence is $1 million dollars. The maximum amount available for all occurrences combined is $2 million dollars.

Will having a two-times Aggregate Limit double my premium? 

No. Generally speaking, the math doesn’t work out that way.

Most insurers understand that having two claims at your limit in one policy period is extremely unlikely. As such, insurers will only increase your premium by 3-5%, if they increase it at all. Many carriers just include the two-times aggregate limit automatically. 

Conclusion

While we discussed some general trends and terms, you have to look at your policy to understand exactly what you’re getting.

Speak to your independent insurance agent to learn more about your aggregate limit. If you don’t have an independent insurance agent—or would like a second opinion—feel free to reach out to us at D&A Insurance.