What does the aggregate limit in an insurance policy represent?

The aggregate limit in an insurance policy refers to the maximum total amount that the insurer will pay for all claims that occur within a specified policy period, which is often one year. This limit aggregates the total payouts across multiple claims rather than capping each individual claim. For example, if a policy has an aggregate limit of $1 million, that means the insurance company will cover up to $1 million in total claims during that policy year, regardless of how many separate claims arise.

While the total amount payable per claim pertains to the specific limits outlined in the policy for individual occurrences, the aggregate limit encompasses all claims combined, making it a critical factor for policyholders who may face multiple claims. Understanding this concept is essential for both adjusters and policyholders to effectively manage risk and expectations regarding coverage.