What Is a General Aggregate Limit?
An aggregate limit, as the name suggests, is the maximum amount that the insurance provides for all the claims filed during the given policy term.
Liability insurance is something that every business needs to protect themselves from medical expenses and lawsuits after the instance of bodily injuries, property damage, or other similar incidents at a job site.
When you reach the maximum stipulated coverage limit, your insurance provider refrains from covering any additional claims and expenses during that particular policy period.
The most common insurance policies that have aggregate limits are general liability insurance and errors and omissions insurance.
The gross value of insurance premiums in the U.S. is $2.6 trillion, which is 49% of the world’s gross insurance premiums.
Insurance Policies with Aggregate Limits
Insurance providers use aggregate limits to prevent themselves from significantly large payouts, which help keep premiums affordable for policyholders.
On the other hand, aggregate limit serves as an important aspect that provides the insured the opportunity to customize the coverage to accurately define the risk exposure, total amount, and budget.
The insurance company takes into consideration the overall payout value and not the total claims to evaluate if you have reached your aggregate limit of liability.
Examples of insurance policies with aggregate limits include:
- Liability insurance
- Business insurance
General Liability Insurance Policies
A general liability policy provides protection against unforeseeable expenses that arise due to sudden bodily injury, property damage, advertising harms, court and legal fees, and similar costs.
Also known as commercial general liability insurance coverage, it serves as a risk management tool for almost all the physical and commercial damages businesses are prone to.
It pays for the medical expenses if you are held responsible for physical injuries to third-party or damaging someone’s property.
In case you are responsible for libel and slander, your commercial general liability insurance pays for that too. All in all, it gives your clients assurance that you can take responsibility for your actions and mistakes at the job site.
Business Insurance Policies
Business insurance policy protects you from financial damages that arise due to mistakes involving your employees, third-party, and your commercial property.
It is designed to protect business owners and small businesses by paying a small coverage amount known as an insurance premium. In return, the insurance provider pays for a huge amount after an accident takes place or a mistake occurs at the workplace.
Business insurance is a comprehensive package of different policies that may include general liability policy, commercial property insurance, workers compensation coverage, commercial auto insurance, and professional liability insurance.
If you are finding it difficult to decide what insurance policy and how much coverage your business needs, Contractors Liability professionals can help you identify the right policy and the insurance quote.
Insurance Policies without Aggregate Limits
Aggregate limits are applicable for indemnity payments and defense costs incurred by the insured. When the cumulative amount of all the payments the policyholder makes during a single policy period exceeds the annual aggregate limit the insurance policy cover depletes.
Not every liability insurance policy has aggregate limits. Generally, insurance policies that are made mandatory by the government do not have an aggregate limit.
The examples of insurance policies without aggregate limits include:
- Workers’ compensation insurance
- Commercial auto insurance
Workers’ Compensation Insurance Policies
In every state, having a workers’ compensation policy is required by law for all employers who have one or more employees, regardless of the business they operate. The policy intends to protect the employers and the employee from paying medical expenses for on-job injuries.
If the employee is injured at the workplace, the insurance will pay for the medical expenses and the lost wages, or any other expenses that fall within the scope of coverage.
Businesses that are prone to intense risks may have to pay more for workers’ compensation insurance. Several factors such as the intensity of risks at the job site, number of employees, job location may influence the aggregate limit of liability.
Employees are not responsible if the employer’s workers’ comp policy is reaching its maximum capped amount. The employer is liable to pay what he owes to the employee.
Auto Insurance Policies
A commercial auto insurance policy protects your business when you or your employee is held responsible for an auto accident. It provides extensive coverage up to the policy limit either if you own a single vanity truck or a fleet of delivery vans.
Your auto insurance pays for expenses that include medical bills, property damage, vehicle damage, legal fees, uninsured motorist, or other similar costs for the given policy period.
It may also cover the expenses for collisions, towing and labor, rental reimbursements, and more. In some cases, you can also upgrade your policy to add or remove a new commercial vehicle that you are using for your business activities.
In many states, commercial auto insurance is required by law. Therefore, all the vehicles that the business utilizes to carry out various operations must be insured.
Aggregate Limit vs. Per Occurrence Limit
Most business insurance policies, regardless of the nature of the business and the coverage, have two limits – aggregate limit and per-occurrence limit.
An aggregate limit, as discussed earlier in this article, is the maximum amount of covered expenses that the insurance company pays to cover all the claims within the given time period. Aggregate limits are usually twice as much as occurrence limits.
Per occurrence limits are the highest amount of covered expenses an insurance company pays in order to cover a single claim for insurance terms.
If your clients ask you about your overall coverage or for proof of insurance, they are asking you for your occurrence limit. A per occurrence limit protects your business and assets in the event when a claim is made.
Secure the Aggregate Limits That You Need with Help from Contractors Liability
Aggregate limits play a key role in how insurance coverage works. To get additional aggregate limits, you can either purchase excess liability insurance or scale your limit as per your business-related needs.
It’s important to note that all active claims covered in the general liability policy will be considered and count toward the annual aggregate limit. That also includes claims filed against additional insured for any particular insurance policy.
Gaining a basic understanding of insurance coverage and its benefits is important. Equally important is to have a reliable and trustworthy insurance professional who can help you understand insurance-related terminologies and processes.
If you are looking to adjust, scale, or review your aggregate claim limits, let us know!
If you want to discuss other insurance requirements, the Contractors Liability team is happy to help. Our experienced insurance agents listen to your business insurance needs and assist you in getting the right coverage for maximum safety.