In insurance terms, an aggregate limit is a defined threshold that shows the maximum payout of a policy over the lifetime of the policy. In auto insurance this period is usually but not always one year.
The aggregate limit is there irrespective of the number of claims made during the limit, once this threshold is exceeded there will be no further eligible claims under the policy.
So for example if your aggregate limit is $20,000 you could make two claims of $10,000 or four claims of $5,000 or any other combination up to the aggregate limit. However if you made three claims of $7,000 each – the first two claims would be paid in full, the third claim would only be paid to a value of $6,000 with the claimant needing to make up the final $1,000 themselves.
What is a per-claim limit?
A per-claim limit is the maximum amount that an insurer will pay on an individual claim made under a policy, in some cases this limit may be the same as the aggregate limit (but in this case if the first claim is at or above the threshold – no further claims may be made against the insurer on the policy) or it may be set at a fraction of the value of the policy.
So for our $20,000 aggregate limit, the policy may have a per claim limit of $5,000. This means that in the instance of 3 claims of $7,000 each, the insurer would pay only $5,000 each and the insured party would need to pay $2,000 on each claim. But there would be a further $5,000 left from the aggregate limit, allowing a further claim in the future.
What’s the purpose of an aggregate limit?
The aggregate limit serves two purposes – firstly it protects the insurance company from exposure to significantly higher risk than can be offset by the premiums. Secondly it enable the customer to determine whether they have appropriate levels of auto insurance cover.
What can I do if I think my policy’s aggregate limit is too low?
Aggregate limits can often be raised by paying an increased premium to the insurer. This increased premium is often not too high so it can be that it makes financial sense to pay the additional rate rather than face exposure to high personal liability in the eventuality of an accident.