What Is An “Aggregate Limit” In Business Insurance?

When reviewing your business liability insurance policy or comparing potential new coverage’s, you must understand the various terms used. If you don’t understand the terms used, you won’t fully know the protections an insurance policy provides. There are different terms to learn about business insurance, but the one we’ll discuss in this post is “aggregate limit.”

What Exactly Is An Aggregate Limit?

This is the maximum amount an insurance company will pay for covered losses during your policy period. When the total cost of your claims exceeds your aggregate limit, you will cover the difference out of pocket.

How Do Aggregate Limits Work?

Let’s say you suffer a loss, such as serious building damage. In this case, you must file a claim with your provider. However, there will be a limit on your business insurance policy. If your claim exceeds that limit, your insurance provider will only pay the amount your policy covers.

For example, if your insurance aggregate limit is $500,000. You could file two separate claims worth $250,000 each in your policy period before you can meet your aggregate limit. You could also file five claims worth $100,000 each before reaching your limit.

Why Is It Important?

The aggregate limit feature meets the needs of both the provider and the policyholder. They meet the policyholder’s needs because they allow you to customize your insurance to reflect your budget and risk exposure. Insurance companies use this limit to reduce their exposure to catastrophic losses. This will enable them to keep their insurance premiums affordable.