Aggregate Limit of Insurance
What Is an Aggregate Limit?
The aggregate limit is the maximum total your policy will pay for all covered claims during the policy period (usually one year). Think of it as your policy’s annual cap.
Like every bottle of nail polish only has so many applications before it’s gone, each claim paid takes away from the policy’s limits. Once the total amount’s been used up, no additional claims can be paid until the policy renews.
How Is the Aggregate Different From the Per Occurrence Limit?
An aggregate limit = the total overall limit.
An occurrence limit = the limit for one individual claim.
| Aggregate Limit | Pre-Occurrence Limit | |
|---|---|---|
|
What It Is |
The maximum amount your insurance will pay for all claims combined during your policy period
|
The maximum amount your insurance will pay for a single claim or incident
|
|
Example |
If your aggregate limit is $2M, and you have three claims in one year totaling $2.2M, the insurance will only pay $2M total
|
If your per-occurrence limit is $1M, and you have a single claim for $1.5M, your insurer will only pay $1M for that incident
|
|
How It Works |
Acts like a total “spending cap” for the policy term. Once it’s reached, no more claims are covered
|
Applies to each separate claim, regardless of how many you have, until you hit the aggregate limit
|
|
Common Limit Amount |
$2M aggregate limit
|
$1M per-occurrence limit
|
What It Is
Aggregate Limit:
The maximum amount your insurance will pay for all claims combined during your policy period
Pre-Occurrence Limit:
The maximum amount your insurance will pay for a single claim or incident
Example
Aggregate Limit:
If your aggregate limit is $2M, and you have three claims in one year totaling $2.2M, the insurance will only pay $2M total
Pre-Occurrence Limit:
If your per-occurrence limit is $1M, and you have a single claim for $1.5M, your insurer will only pay $1M for that incident
How It Works
Aggregate Limit:
Acts like a total “spending cap” for the policy term. Once it’s reached, no more claims are covered
Pre-Occurrence Limit:
Applies to each separate claim, regardless of how many you have, until you hit the aggregate limit
Common Limit Amount
Aggregate Limit:
$2M aggregate limit
Pre-Occurrence Limit:
$1M per-occurrence limit
How Do Multiple Claims Affect the Aggregate?
Every claim made during your policy period is subtracted from your coverage limit, aka the aggregate. For example, say you have a policy with a $2 million aggregate limit, a $1 million per occurrence limit, and you make three claims with the following costs:
- Claim A: $500,000
- Claim B: $800,000
- Claim C: $800,000
Claim A
Your insurance pays $500,000. Your remaining aggregate (total) limit is: $2,000,000 – $500,000 = $1,500,000.
Claim B
Your insurance pays $800,000. Your remaining aggregate limit is now: $1,500,000 – $800,000 = $700,000.
Claim C
Since your remaining limit is $700,000, your insurance can only pay $700,000 of this $800,000 claim. Your remaining aggregate limit is now: $0.
When your aggregate limit hits $0, your coverage is exhausted. So, your policy won’t be able to pay for additional claims until it renews.
What Happens If I Hit the Aggregate Limit?
Once your aggregate is exhausted, no further payments can be made under that coverage type for the rest of the policy term. If this happens, your options moving forward are:
- Waiting until renewal when your limits reset
- Requesting a higher aggregate, or excess liability coverage mid-term or at renewal, if available
How Do I Choose the Right Limits as a Beauty and Bodywork Professional?
- Venue Requirements: Many leases, landlords, and events will specify minimum per-occurrence and aggregate limit amounts
- Client Volume and Services: More appointments or higher-risk modalities increase your chances of having multiple claims, which would likely need higher limits
- Risk Tolerance: If several small claims would strain your business, get higher limits
- Retail Sales: If you sell products, confirm whether or not your policy has a separate products-completed operations aggregate limit that would apply only to product-related claims
Additional Resources
Related Terms
- Per-Occurrence Limit
- Excess Liability
- Additional Insured
- Certificate of Insurance (COI)
- Deductible
- Actual Cash Value
