What does general aggregate limit mean in a liability insurance policy?

The general aggregate limit in a liability insurance policy refers to the maximum amount an insurer will pay for all claims during the policy period. This limit is crucial because it caps the insurer's liability for multiple claims arising from various incidents that occur within the specified term of the policy. If claims exceed this aggregate limit, the insured is responsible for any additional costs incurred.

This concept is particularly significant in commercial policies where businesses might face a higher volume of claims throughout the year. By establishing an aggregate limit, the insurer protects itself from potentially crippling financial exposure while providing coverage for various liability claims.

In contrast, the limits for individual claims are typically specified as separate per-claim limits, distinct from the aggregate limit, which pertains to the cumulative total of all claims. The amount of premiums paid pertains to the cost of the insurance rather than coverage limits. Lastly, there is no cap on the number of claims allowed per year stipulated by this limit; rather, it addresses the total payout across all claims within the defined period. Thus, understanding the general aggregate limit is essential for both insurers and insured parties to effectively manage and anticipate potential liabilities.