How does an "aggregate limit" differ from a "per occurrence limit"?

The distinction between an aggregate limit and a per occurrence limit is fundamental in understanding the coverage terms of an insurance policy. An aggregate limit refers to the maximum amount an insurer will pay for all claims during a specific policy period, regardless of the number of incidents. This means that if multiple claims occur, they will collectively draw from this single limit, which can be exhausted if the claims are numerous or high in value.

On the other hand, a per occurrence limit pertains to the maximum amount the insurer will pay for a single event or claim. Each claim is assessed separately under its own limit, allowing for higher potential payouts across different incidents within the same policy period.

Therefore, saying that an aggregate limit applies to multiple claims rather than a single claim accurately captures the essence of what sets it apart from the per occurrence limit. Understanding this difference is crucial for policyholders to gauge their coverage properly and manage their exposures in various situations.