Many business owners are familiar with the need for commercial insurance and general liability coverage. However, it’s common for business owners to have no idea about the amount of their general aggregate limit. Unfortunately, individuals don’t even learn what an aggregate limit is until it’s been exceeded. Your commercial insurance policy’s aggregate limit comes out of your pocket after the limit.
What Is General Aggregate Limit in Commercial Insurance?
The aggregate limit in your commercial insurance policy is the maximum amount your insurer will reimburse you for all covered losses within the term of your policy. When you reach your aggregate limit, your insurer will pay no additional claims during the policy period. The general aggregate limit in your commercial insurance policy refers to the maximum amount your insurer will pay for covered liability claims during your insurance term. Thus, if you’ve exhausted your general aggregate limit, your insurer is no longer responsible for covering property damage, bodily injury, medical expenses, or lawsuits.
Types of Aggregates
Reach your insurance policy’s aggregate limit in different ways. Businesses in different industries have different insurance needs. Your customized commercial insurance policy may use different aggregate types to reimburse claims based on the needs of your business. These are the most common types of aggregates.
- Policy Aggregate: Also called the general aggregate, your policy aggregate limit defines the limit of coverage for all covered claims within the policy’s term.
- Per Project Aggregate: General aggregate limits apply to each project the policyholder works on. Then, spread the policy aggregate across multiple products. The construction industry uses this aggregate where a business works on many projects.
- Per Location Aggregate: When policy limits spread across various locations, each location has an aggregate limit that applies to each location of the policyholder. Owners of multiple buildings and retail stores use this type of aggregate.
- Products-Completed Aggregate: Often separate from your policy aggregate, your products-completed aggregate is the limit your policy will pay out on covered claims when your product or completed service injures people or property.
Occurrence Limit vs. Aggregate Limit
Insurance protects you from costs due to unexpected occurrences and accidents. To properly accomplish this, your policy may have more than one limit. An occurrence limit is the maximum amount your insurer will reimburse you for one covered incident or claim. The aggregate limit is the maximum amount your insurer pays for all covered claims over the term of your policy. Depending on your policy limits, one claim or multiple claims reach your aggregate limit.
General Aggregate vs. Umbrella
Reaching your general aggregate limit can seem like a catastrophe, but there are ways to put a failsafe in place. Commercial umbrella insurance is a policy designed to be used as a supplemental policy to provide coverage when your primary policy limit is exhausted. Thus, when you exceed your general aggregate limit, a commercial umbrella policy acts as an additional layer of liability coverage to protect you against liabilities that would otherwise be paid out-of-pocket.
Applying Your Aggregate Limit
Part of understanding your aggregate limit is learning how it works when filing claims. If you have a general liability aggregate limit of $20,000, and you’ve been sued for $5,000 twice, $4,000, and $3,000, you’re only $3,000 away from your aggregate limit. Further, if a covered event occurs that costs $5,000, you’ll be paying $2,000 out-of-pocket. Lastly, if any additional claims are filed for the remainder of your policy’s term, you’ll have to pay the costs yourself. That’s why it’s essential to calculate a coverage limit adequate for the risks you face in your unique business.
If you’re struggling to understand the amount of commercial insurance coverage you need, contact an independent insurance agent. LoPriore Insurance Agency is a full-service independent insurance agency that helps you find commercial and personal insurance that fits your lifestyle. Speak with one of our experienced agents to learn more about general aggregate limits and how they can help you get the protection you need.
Frequently Asked Questions About General Aggregate Limits
What Is General Aggregate in Commercial Insurance?
Your general aggregate limit is the total amount you can claim within the term of the policy (usually one year). When you’ve exceeded your general aggregate limit, additional claims won’t be applied even if normally covered under the policy.
What Is the Difference Between General Liability and General Aggregate?
General liability describes the type of insurance policy you have. Your general aggregate is the maximum limit of coverage supplied by your general liability policy within the term. Hence, your general aggregate is an element of your general liability policy.
Combined Single Limit vs Aggregate
No. Combined single limit is the maximum amount your insurer will pay for all components of a single claim. In a sense, it’s a different type of per-occurrence limit. Your aggregate describes the total limit of your policy’s coverage for a determined amount of time.
What Do Per Claim and Aggregate Mean?
Per claim or per occurrence describe the limit your insurer will pay for a single covered claim. Aggregate is the limit your insurer will pay for all claims within the life of the insurance policy. There is usually a distinct difference in these amounts since your policy is designed to cover multiple claims if necessary.
How Do I Choose a Sufficient Aggregate Limit?
It’s a careful balancing act to choose a limit that will provide sufficient coverage without overextending the costs. While you can’t predict the future, you can use some important information to choose a reliable amount of coverage. Learning the risks in your industry along with the number of typical lawsuit claims can help. Discuss your industry risks and average occurrence costs, along with the term length of your policy. Thus, your independent insurance agent determines the amount most likely to provide sufficient coverage.
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