Aggregate Limit

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Aggregate Limit An aggregate limit in insurance refers to the maximum amount an insurer will pay for all covered losses during a specific period, usually one year. It's like a ceiling on the insurer's financial responsibility, regardless of the number of individual claims made within that period. If you suffer a loss (e.g., damage to your business property or a customer injury on your premises), you must file a claim with your insurer to receive benefits under your small business insurance policy. The maximum amount of money your insurer will pay for all the claims you file during the policy period, typically one year, is known as your aggregate limit. Once the aggregate limit is reached, the insurer is no longer obligated to pay for any further losses during the policy period. Example: magine you have a commercial liability policy with an aggregate limit of $1 million. You face two separate claims: $750,000 for property damage and $300,000 for bodily injury. The insurer will cover the entire $750,000 for property damage. For the bodily injury claim, they will only pay $250,000, bringing the total payout to $1 million (the aggregate limit). You would be responsible for the remaining $50,000 of the bodily injury claim. Why Are Aggregate Limits Necessary? Aggregate limits are a policy feature that meets the needs of both insurance customers and insurance carriers. They meet your needs because they give you the ability to customize your insurance to reflect your risk exposure and budget. If you face modest risks and have a limited budget, purchasing a policy with lower limits will keep you safe, while lowering your premiums. If you have substantial risks and a sufficient budget, you can increase your limits to provide more protection for a higher premium. Insurance companies use aggregate limits to reduce their exposure to catastrophic customer losses. This allows them to keep their premiums affordable while making sure their finances remain strong. Aggregate limits are distinct from per-occurrence (or per-claim) limits. These refer to the maximum amount an insurer will pay for a single claim or incident. When the value of your total claims exceeds your aggregate limit, you will have to pay the difference out of pocket. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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