What does aggregate coverage limit in general liability policies?

Aggregate coverage limit in general liability policies refers to the total payout for all claims made during a policy year. This limit specifies the maximum amount that the insurance company will pay for all claims combined within the policy term, regardless of the number of individual claims that may be filed.

For instance, if a general liability policy has an aggregate limit of $1 million, this means that the insurer will cover up to $1 million for all claims combined during that policy year. If claims exceed this amount, the policyholder will be responsible for any additional costs beyond the aggregate limit. This feature helps businesses manage their overall risk exposure by capping the total liability the insurer must cover.

This coverage is crucial for businesses as it provides a safeguard against multiple claims arising within a single policy period, ensuring they are protected without facing an unlimited financial burden. In essence, it defines the insurer's liability for a specific timeframe, making it a key element of risk management within general liability insurance.