What does an Aggregate Limit in an insurance policy represent?

• A. The maximum payout per event
• B. The total payout for all losses
• C. The minimum coverage required
• D. The average claim size

Answer: (B)

An Aggregate Limit in an insurance policy represents the total amount that an insurer will pay for all covered losses during a specific policy period, regardless of the number of individual claims made. This limit is important because it helps both the insurer and the insured understand the maximum financial exposure the insurer is willing to cover over the life of the policy.

For example, if a policy has an aggregate limit of $1 million, the insurance company will pay up to that amount for all claims combined over the coverage period. Once the aggregate limit is reached, no further claims will be paid, even if new incidents occur.

This concept is particularly relevant in liability policies where multiple claims for different incidents may arise within the same policy period, and it provides a cap on the total liability exposure. Understanding the aggregate limit helps policyholders manage their risks and ensures they are aware of the maximum coverage available for their overall needs.