Aggregate Limit

An aggregate limit is a defined threshold showing the maximum payout of a policy over the lifetime of the policy. However, aggregate limits rarely play a role in the car insurance world. They're more common with health insurance policies. The primary purpose of an aggregate limit is simple: aggregate limits protect insurance companies from exposure to significant risk and financial loss.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Apr 13, 2021

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An aggregate limit is a defined threshold showing the maximum payout of a policy over the lifetime of the policy.

With car insurance, the aggregate limit is typically one year. That means the limit gets reset every year.

However, these limits rarely play a role in the types of car insurance world. They’re more common with health insurance policies.

The limit exists regardless of the number of claims made during the period. Once the limit is exceeded, however, there will be no further eligible claims under the policy.

Let’s say you have a car insurance policy where your aggregate limit is $100,000. Under this policy, you can make five claims of $20,000 or ten claims of $10,000 or any other combination of claims. However, if you made three claims of $40,000, then the first two claims would be paid in full, while you would only receive half of the final claim.

What is a per-claim limit?

Car insurance policies also have a per-claim limit. This is the maximum amount an insurance company will pay on an individual claim made under a policy.

In some cases, the per-claim limit is the same as the aggregate limit. In other cases, they’re different.

Let’s say our policy has a $100,000 limit and a $30,000 claim limit. If we made the same three $40,000 claims mentioned above, then the insurance company would only pay $30,000 on each claim, leaving us with a total leftover value of $10,000.

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What’s the point of an aggregate limit?

Why do insurance companies have these limits?

The primary purpose is simple: these limits protect insurance companies from exposure to significant risk and financial loss.

If an insurance company’s customer has an unlucky year with multiple accidents or surgeries, then the insurance company isn’t on the hook for millions of dollars when they’re only charging $1,000 per year for the policy. Aggregate policies help guarantee the profitability of the insurance company – often at the expense of the policy.

Can I raise my aggregate limit?

You can raise your limit by paying higher premiums to your insurance company. Sometimes, you can pay an extra fee per month to avoid limits entirely.

The higher premiums offset the additional risk absorbed by your insurance company. Typically, the price hike isn’t large.

Some risk-averse policyholders find they would rather pay higher insurance premiums today than face exposure to higher personal liability risk in the future.

When are aggregate limits most commonly used?

We don’t usually hear about aggregate limits in the car insurance world. Instead, these limits are particularly common in the American health insurance industry.

Many healthcare plans carry aggregate limits to prevent insurance companies from covering costly claims. If your family exceeds its annual aggregate limit – say, if multiple members of your family each had a major surgery in a one year period – then your insurance company may refuse to cover future claims, and you may need to pay for additional medical expenses out of pocket.

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How can you check to make sure you’re covered?

Insurance companies can be sneaky. You might assume you have a car insurance policy that covers up to $100,000 per accident in personal liability. However,because of low per-claim limits or aggregate limits, your insurance company may never be required to pay the full $100,000 amount.

That’s a problem for more serious accidents. You might collide with a minivan and seriously injure an entire family. Their medical bills total $95,000. You think that’s okay because your insurance policy covers up to $100,000. However, your insurance policy also has a per-claim limit of $50,000. That means your insurance company will cover the first $50,000 you owe, while you must pay the remaining expenses out of pocket.

Check your policy’s aggregate limit to make sure it provides the protection you need. A low aggregate limit or per-claim limit can expose you to significant risk.

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