Don’t get left out. Trying to figure out the right policy for you may seem intimidating, but ProAction Insurance is here to help!
Liability insurance is something every business owner needs in case you’re sued and held legally responsible for bodily injury, property damage, or other unfortunate situations. But it’s not always easy to figure out exactly which types of coverage your business insurance policy gives you, and that’s made even more complicated by some seemingly technical terminology that can be hard to understand. If you’ve seen references to “aggregate limit” or “per claim” limit and wondered what those words mean for you and your business, read on.
While any type of liability insurance is designed to protect you and your business in case you are sued, it’s important to note that the amount you’ll be paid in case of a claim is limited per claim or per aggregate, though they may overlap.
If you’re not familiar with the terminology, don’t worry! Understanding aggregate limits of liability – as opposed to per claim limits – is actually quite easy.
Aggregate Limit and Per Claim Limit
Many insurance policies have what is called an aggregate limit. The aggregate limit of liability is the total amount in dollars that you will be paid by your insurance policy. It may be definitive, as in a general lifetime maximum for claims, or it may be set annually (like $500,000 per year). Because it’s a sum total, aggregate insurance can cover more than one claim.
In addition to aggregate limits, there are usually limits on the amount of money that can be paid per claim, also known as per occurrence. Occurrence refers to the maximum amount of money the insurance will cover for any one instance. For example, if you have a per claim limit of $20,000 and you incur damages of $30,000, you would be responsible to cover the remaining $10,000.
What Does This All Mean?
Sometimes the easiest way to understand something like this is to look at a specific example.
So, let’s say you have a policy with a $1,000,000 aggregate limit and a $50,000 per claim limit.
You had two claims in one year, the first for $75,000 and the second for $45,000.
The first claim would be covered up to $50,000, since that is your per claim limit. You would need to pay the remaining $55,000.
The second claim would be covered fully, since it’s under your per claim limit of $50,000.
If you had a really bad year and had additional claims, they would each be covered up to your per claim limit of $50,000.
If you had 7 claims in one year that exceeded $1,000,000, then these claims wouldn’t be covered because they would exceed your aggregate limit.
Take a good look at your coverages to make sure you are familiar with your individual and aggregate limits. If you’re still unsure, give ProAction a call today and we can walk you through the process. It is important to understand your policy and know exactly when your insurance policy is going to cover you in the event of a lawsuit.