What are aggregate limits in insurance policies?

Aggregate limits in insurance policies refer to the maximum payout amount that an insurance policy will pay during a specific term, typically a year. This limit encompasses all claims made during that policy period, ensuring that the insurer has a defined cap on their financial liability.

For example, if an insurance policy has an aggregate limit of $1 million, it means that no matter how many claims are made within that policy year, the total payout will not exceed that $1 million. This is crucial for both insurers and policyholders, as it provides a clear framework around coverage limits and helps insurers mitigate risk.

The other options refer to different aspects of insurance coverage. The maximum payout for damage or injury per occurrence usually refers to per-occurrence limits, which cap the payout for individual claims rather than the cumulative total across all claims. The total number of claims allowed per year is not typically defined in insurance policies and can vary widely depending on the type of policy. Lastly, minimum coverage amounts required by law refer to statutory obligations but do not relate to how aggregate limits function.