In a liability policy, what is the difference between an occurrence limit and an aggregate limit?

In a liability policy, what is the difference between an occurrence limit and an aggregate limit?

• A. They are the same.
• B. Payments do not affect limits.
• C. Occurrence limit applies per policy period; aggregate per claim.
• D. Occurrence limit is the max per claim; aggregate limit is the max per policy period.

Answer: (D)

Two limits govern liability payouts. The occurrence limit is the maximum amount the insurer will pay for any single event or claim. So for one incident, you won’t receive more than this amount, even if the damages are higher. The aggregate limit is the total cap on payments for all claims during the policy period. If several claims arise, the insurer can pay up to the aggregate limit in total for that term, after which no further payments are made, even if individual claims haven’t reached their per-claim limit. This distinction means the per-claim limit protects against a single large incident, while the aggregate limit protects against many incidents exhausting the policy’s total coverage for the period. For example, if the occurrence limit is 500,000 and the aggregate limit is 2,000,000, a single incident can be paid up to 500,000, and the combined payments across all incidents in the term cannot exceed 2,000,000.

Two limits govern liability payouts. The occurrence limit is the maximum amount the insurer will pay for any single event or claim. So for one incident, you won’t receive more than this amount, even if the damages are higher. The aggregate limit is the total cap on payments for all claims during the policy period. If several claims arise, the insurer can pay up to the aggregate limit in total for that term, after which no further payments are made, even if individual claims haven’t reached their per-claim limit. This distinction means the per-claim limit protects against a single large incident, while the aggregate limit protects against many incidents exhausting the policy’s total coverage for the period. For example, if the occurrence limit is 500,000 and the aggregate limit is 2,000,000, a single incident can be paid up to 500,000, and the combined payments across all incidents in the term cannot exceed 2,000,000.