How do "aggregate limits" differ between liability policies?

Aggregate limits in liability policies refer to the maximum amount that an insurer will pay for all claims arising within a specified policy period, usually one year. When an aggregate limit is set, it encompasses the total payouts for multiple claims, meaning that once the aggregate limit is reached, coverage ceases for the remainder of that period. This is a critical aspect of liability insurance as it helps manage the insurer's risk and ensures that they do not face unlimited exposure.

Understanding aggregate limits is essential because it affects how much coverage is available for multiple claims or incidents within the coverage period. Unlike fixed costs, which may not vary, aggregate limits are defined by the specifics of the liability policy and can indeed change from one policy period to another based on renewal negotiations and underwriting assessments.

Individual claim limits, on the other hand, refer to the maximum payment for a single claim, distinct from the overall cap set by aggregate limits. It's also important to note that aggregate limits apply specifically to liability policies, rather than property insurance, which often has different structures regarding coverage limits and payouts.