Know your Insurance – Aggregate Limit of Liability

Know your Insurance – Aggregate Limit of Liability

General, Industry

What does an aggregate policy provide you? Have you checked your insurance if in a group member policy?

DEFINITION of ‘Aggregate Limit of Liability’

The most that an insurer is obligated to pay to an insured party during a specified period. The aggregate limit of liability is spelled out in the insurance contract and caps the amount of covered losses an insurer will pay for. These limits are part of commercial and professional general liability insurance policies.

BREAKING DOWN ‘Aggregate Limit Of Liability’

Insurance policies limit not only how much they will pay for a single incident, but also how much they will pay during the policy term, which is typically one year. If the policyholder files enough claims to reach the aggregate limit, he or she is effectively uninsured.

A policy may have several different types of limits. A general aggregate limit applies to all types of claims the policy covers, including property damage, bodily injury and liability. A per occurrence limit applies to every incident for which the insured party files a claim. A medical expense limit caps how much the insurer will pay for an injured party’s medical bills. A general aggregate limit of liability applies to all types of liability claims the policy covers, such as personal and advertising injury.

Suppose a doctor’s professional liability insurance policy has limits of $1 million per incident and $2 million per year. If the doctor is sued twice during the policy year and loses both times, and each time, the plaintiff receives $1 million in damages, the doctor will have to hope she isn’t sued a third time that policy year since her policy’s aggregate annual liability limit of $2 million has been exhausted. She won’t have any additional coverage until the next policy year. In this way, even though liability insurance protects policyholders, it gives them an incentive to avoid being sued, since there are limits to their coverage. These limits also protect insurance companies against unlimited losses, which helps them to stay in business and continue offering insurance.

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