What does "aggregate limit" refer to in liability insurance?

The term "aggregate limit" in liability insurance refers to the total amount that the insurer will pay for all claims that occur during a specified policy period, which is typically one year. This limit encompasses all claims, regardless of the number of incidents or claims filed, thus providing a cap on the total financial exposure for the insurer within that timeframe.

Understanding aggregate limits is crucial for policyholders, as it determines the maximum payout available during the policy term. If multiple claims arise, once the aggregate limit is reached, the insurer will no longer cover additional claims until the policy renews. This concept is important for businesses to manage risks effectively, ensuring they have adequate coverage to protect against potential liabilities that could result in significant financial losses over a period of time.

Other options focus on specific aspects of coverage or limits that do not reflect the comprehensive nature of the aggregate limit. For instance, individual claim limits pertain to the maximum payout for a single claim rather than the overall total for the policy period, while legal fees and property damage limits are more specialized and do not encompass all claims across the board.