The Difference Between a “Per Occurrence Limit” and an “Aggregate Limit”

When you work in insurance, you quickly learn that every single word counts, especially when that word is inside an insurance policy document. That’s why it’s so important for business owners to understand the language they are likely to see in their insurance policy, whether it’s their general liability, workers compensation, employee practices liability, commercial auto, and many additional types of business policies.

Luckily, that’s why we’re here. Today, we’re going to discuss two really important phrases that will mean a lot to you if you ever have to make a claim on your insurance. The terms are “per occurrence limit” and “aggregate limit”.

For our purposes, let’s look at a typical general liability policy. A small construction company may have a general liability policy with an aggregate limit of $2,000,000. This may lead the company owner to believe that if a house his crew is working on is damaged in a fire, his insurance company will cover the damage up to the amount of $2,000,000.

This common misconception is untrue. Many insurance policies, including general liability policies, have “per occurrence” limits, meaning that they will pay up to a certain amount of money per occurrence. The construction company owner above may have a $2,000,000 aggregate limit with a $1,000,000 per occurrence limit, which means his insurance company will only pay up to $1,000,000 for the damaged home.   If damages were to exceed $1,000,000 for this occurrence, or claim, the construction company owner would be responsible for the difference.

When you are in the market for an insurance policy, please make certain that you understand the difference between an aggregate limit and a per occurrence limit.  Ask your San Diego insurance broker to detail the coverage limits, so there are no surprises in the event of a loss.

It will probably look something like this on your policy:

$2,000,000           General Aggregate
$1,000,000           Per Occurrence Limit

At Fusco & Orsini Insurance Services, we’re always happy to review our clients’ policies with them so they know exactly how much financial support to expect when disaster strikes.