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What Is a General Aggregate for Insurance?
A general aggregate for insurance is the maximum amount of money an insurer will pay out for claims during the policy period. Another name for this is “aggregate limit of liability.” You’ll typically find general aggregate limits for many types of business liability insurance policies, including general liability insurance and professional liability insurance.Let’s say you have a $1 million aggregate limit for your general liability coverage, also known as commercial general liability (CGL) insurance. That means the $1 million limit is the maximum amount your insurance will pay for claims during the policy term.
How Does the General Aggregate Limit Work?
The general aggregate limit applies to the total amount insurance companies will pay for covered losses during the policy period. If you reach the limit before the end of your policy period and there’s another claim, you’ll have to cover the costs out of pocket.Let’s use a business’ CGL policy with a $1 million aggregate limit as an example:
- The business’ insurer already covered $750,000 in claims
- A customer slips and falls in the business and has to go to the hospital
- The customer sues to cover their medical expenses and ongoing care costs
- The total claim costs $300,000
- The business’ insurance company will only cover $250,000 of the claim because of the aggregate limit
- The business must cover $50,000 out of pocket, unless they have a commercial umbrella insurance policy
Why Is It Important To Understand the General Aggregate in Insurance?
Many small business owners may not fully understand or know about their general aggregate limits until it’s too late. If your business faces a risk of a major catastrophe, it’s essential to have a high enough general aggregate coverage limit for insured protection. Otherwise, you may end up without insurance coverage for the remainder of your policy after catastrophe happens.
What Is the Difference Between the General Aggregate Limit and the Per Occurrence Amount?
Be aware that the occurrence limit is different from the aggregate limit. An occurrence limit is the max an insurance company will cover per claim. The aggregate limit is the total claim costs an insurer will cover during a policy period, which is typically one year.
Do All Insurance Policies Have an Aggregate Limit?
Not every type of business insurance has aggregate limits. Typically, insurance coverage required by a state won’t have an aggregate limit. This includes business car insurance or workers’ compensation insurance.How To Increase Your General Aggregate Limit With an Excess Liability Policy
Excess liability policies extend the coverage limits for certain insurance policies. Another name for this coverage is commercial umbrella insurance. If you have a general liability insurance policy, you can get umbrella insurance to extend the aggregate limit. So, if a claim exceeds your general liability policy’s limits, your umbrella coverage can help pay the difference.
Summary
We know choosing the right general aggregate limit for your business can be difficult. It’s impossible to predict the future, but preparing for the worst-case scenario can help your business deal with a catastrophe. You can work with an insurance agent or one of our specialists to figure out what your business’ general aggregate limit should be. We’re here to answer your questions about our insurance products and share how we can help protect your business. Get a quote today.
Last Updated: August 11, 2022