Aggregate limit

How it works

Liability policies usually have two main limits. The per-occurrence limitPer-occurrence limitA per-occurrence limit is the most a liability policy will pay for all claims arising from a single incident, however many people are hurt or claims are filed.Read the definition caps what the policy pays for any one claim. The aggregate limit caps the total for every claim during the policy periodPolicy periodThe policy period is the span of time between a policy’s start and end dates, usually 12 months, during which its coverage is in force.Read the definition, which is usually a year.

Each paid claim draws down the aggregate. Once it’s used up, the policy pays nothing more for new claims until it renews, and anything beyond that falls to your business. A general liability policy written as $1 million per occurrence and $2 million aggregate (illustrative) can pay up to $1 million on one claim and up to $2 million across all claims that year.

Whether legal defense costs eat into the aggregate depends on the policy. Many general liability policies pay defense in addition to the limits, while many professional liability and cyber policies count defense costs against them. Your policy wording settles it.

Separate aggregates and sublimits

Some policies carry more than one aggregate. General liability often has a separate aggregate for products-completed operationsProducts-completed operationsProducts-completed operations is the part of general liability that covers injuries or damage caused by your finished work, or products you sold, after the job is done.Read the definition claims, so a bad year for claims about finished work doesn’t use up the limit for injuries at your premises. A sublimitSublimitA sublimit is a smaller cap within a policy’s overall limit that applies to one specific type of loss or coverage, and it doesn’t add to the overall limit.Read the definition can also cap one kind of loss inside a larger limit.

Why it matters for a small business

Leases and contracts often name both numbers, and you’ll see both on your certificate of insuranceCertificate of insuranceA certificate of insurance (COI) is a one-page summary that proves your business has insurance, listing your policies, limits, insurers and policy dates.Read the definition. When you choose limits, think about how many claims your business could face in one year, not just the worst single claim. The guide to choosing liability limits walks through it, and you can see how limits work on the general liability page.