There is an important term on general liability policies called the general aggregate limit, which policyholders should understand.
The general aggregate limit of an insurance policy is the maximum amount of money the insurer will pay out during a policy term. This is different than a “per occurrence ” limit, which is the maximum amount the policy pays out per claim levied against you within the term of your policy.
Understanding the General Aggregate Limit
What this term means is that if the costs of judgments awarded, or legal fees of all combined claims made against you within the term of the policy (often an annual, or yearly) limit, then the insurance will no longer pay for the costs of your legal fees or damages awarded, because the policy will have been exhausted. They become your responsibility just as any expenses or costs above and beyond the “per occurrence” limits do.
This limit, or ceiling, applies to covered incidents of bodily injury, property damage, personal injury, and advertising injury, with the exception of injuries related to the products-completed operations hazard. Damages paid out for medical expenses are also included in the general aggregate limit. Once the general aggregate limit has been exhausted, the insurer is under no obligation to cover losses in any of those categories.
Some policies have the same limits for “per occurrence” claims and the “aggregate limit”. However, other general liability coverage policies will have something along the lines of $1,000,000 per occurrence limit and a $2,000,000 general aggregate limit (excluding products-completed operations).
means that, in this example, individual claims have a limit of $1,000,000 each, while the total policy coverage for all claims made against you within the term of your policy will not exceed $2,000,000 total. If you have 10 claims totally $200,000 or less, for instance, all is well. But it is conceivable for a single claim to exceed the $2,000,000 coverage limits in today’s society.
Many insurance carriers offer higher general aggregate limits. Keep this in mind as you can minimize your risk by purchasing an insurance policy with a higher aggregate limit.
What does this mean for you?
It’s one thing to understand the concept of the rule, it’s another thing to understand it in context of your business. Insurance companies, like all other businesses, face risks. Their goal is to provide you with the protection you need to take care of your business while minimizing their risks. The general aggregate limit is a means to balance insurer risks with insured protection.
If you’re in a field where lawsuits are the rule rather than the exception, or one in which the rare legal action may bring high costs (think product recalls), then you might want to consider investing in greater coverage limits when you take out your policy.
It’s always best to work with a qualified, experienced, and reputable insurance agent in order to determine the right balance of liability coverage for the needs of your business and in your industry. Contact Honig Conte Porrino Insurance Agency today to learn more about your general aggregate limit of your insurance policy.