What does "aggregate limit" refer to in insurance?

The term "aggregate limit" in insurance specifically refers to the maximum amount an insurer will pay for all claims over a defined period, typically within a policy year. This limit is crucial for both insurers and policyholders as it sets a cap on the insurer’s liability, helping to manage risk.

For example, if a business has an aggregate limit of $1 million on its general liability policy, this means that the insurer will not payout more than $1 million for all claims combined during that policy period. This is an important concept because it helps ensure that the insurance coverage remains within predetermined financial boundaries, providing clarity to policyholders about the extent of their protection.

The incorrect choices relate to different aspects of insurance limits but do not capture the essence of the aggregate limit. One discusses a minimum payout, another focuses on the number of claims, and the last suggests payment regardless of set limits, all of which do not align with the fundamental definition of aggregate limits.