Limits Define Your Protection

When you buy liability insurance, the limits define the maximum the policy will pay. But limit structure matters as much as the numbers themselves. Understanding per occurrence and aggregate limits helps you evaluate whether your coverage is adequate.

Per Occurrence Limit

The per occurrence limit is the maximum your policy pays for any single covered incident. If you have a $1 million per occurrence limit and one accident results in claims totaling $1.2 million, your policy pays $1 million; you’re responsible for the $200,000 excess.

Each separate occurrence has its own limit. If you have three unrelated incidents in one policy year, each can use up to the full per occurrence limit.

Aggregate Limit

The aggregate limit is the maximum your policy pays for all claims during the policy period, regardless of how many separate incidents occur. Once you reach the aggregate limit, the policy stops paying even if individual occurrences haven’t exceeded their limits.

Example: You have $1 million per occurrence and $2 million aggregate. You have three separate incidents, each resulting in $900,000 in claims. Individual occurrence limits aren’t exceeded, but total claims ($2.7 million) exceed the aggregate. The policy pays $2 million total; you’re responsible for $700,000.

Common Limit Structures

General liability policies typically show limits as “$1,000,000 per occurrence / $2,000,000 aggregate.” The first number is your per-occurrence limit; the second is your annual aggregate.

Some policies have separate aggregates for different coverage types. Products and completed operations often have their own aggregate separate from premises operations.

Why Both Limits Matter

A single catastrophic claim is limited by your per occurrence limit. But a business with frequent smaller claims could exhaust its aggregate limit, leaving it uninsured for the remainder of the policy year.

Industries with higher claim frequency need to pay attention to aggregate limits. A business expecting few claims might focus primarily on per occurrence limits.

When Limits Reset

Limits typically reset at policy renewal. If you’ve used significant aggregate capacity, you need to maintain coverage to protect against claims during the remaining policy period.

Umbrella and Excess Considerations

Umbrella policies provide additional limits above your underlying coverage. They can both increase per occurrence protection and add aggregate capacity. For businesses needing higher limits, umbrellas are usually the most cost-effective solution.