Per-Occurrence vs. Aggregate Limits: Two Ceilings on the Same Policy
Many liability policies cap what they pay per incident and also in total for the policy period. Here is how the two limits interact, with an example where a third claim runs out of coverage.
Many liability policies list two limits side by side, such as $1,000,000 per occurrence / $2,000,000 aggregate. They are two separate ceilings, and both apply.
- The per-occurrence limit is the most the policy pays for any single incident.
- The aggregate limit is the most the policy pays for all covered claims during the policy period, usually a year.
A worked example
A hypothetical business liability policy has a $1,000,000 per-occurrence limit and a $2,000,000 aggregate. During one policy year, three separate covered claims are settled:
| Claim | Amount | Policy pays | Aggregate remaining after |
|---|---|---|---|
| Claim 1 | $600,000 | $600,000 | $1,400,000 |
| Claim 2 | $900,000 | $900,000 | $500,000 |
| Claim 3 | $700,000 | $500,000 | $0 |
Show the numbers behind this chart
| Claim amount | Policy pays | |
|---|---|---|
| Claim 1 | $600,000 | $600,000 |
| Claim 2 | $900,000 | $900,000 |
| Claim 3 | $700,000 | $500,000 |
Each claim is under $1,000,000, so the per-occurrence limit never binds. But by the third claim, only $500,000 of the aggregate is left. The remaining $200,000 is not covered by this policy.
Where you'll see these limits
- Commercial general liability policies commonly have per-occurrence and aggregate limits, often with a separate aggregate for products and completed operations.
- Professional liability policies often use per-claim and aggregate limits.
- Health and some other policies may have annual or lifetime limits on specific benefits, although federal law prohibits annual and lifetime dollar limits on essential health benefits in most health plans.
Personal auto and homeowners liability usually apply a per-occurrence or per-accident limit and are less likely to have an aggregate, but always check the policy.
Defense costs
Whether legal defense costs reduce the limits matters a great deal. On many commercial general liability policies, defense costs are paid in addition to the limits. On many professional liability policies, defense costs are inside the limits, so every dollar spent on lawyers reduces what is left to pay a settlement or judgment. The policy wording controls.
Reinstatement and umbrella coverage
Once an aggregate is exhausted, the policy generally pays nothing more for the rest of the policy period, unless it has a reinstatement provision. An umbrella or excess policy can sit above the underlying limits and may respond when an aggregate is exhausted, depending on its terms. See our guide on liability limits and umbrella insurance.
The takeaway
The per-occurrence limit caps any one incident; the aggregate caps the whole year. A policy can run out even when every claim is below the per-occurrence limit. If you face the possibility of several claims in one period, look closely at the aggregate, how defense costs are handled, and whether excess coverage sits above it.
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