What does the term 'Aggregate Limit' mean in insurance?

The term 'Aggregate Limit' in insurance refers to the total maximum amount an insurer will pay for all claims that arise during a specific policy term. This limit encompasses all types of claims within the policy's coverage limits and sets a cap on the insurer's liability over the duration of the policy. For instance, if a business holds a liability insurance policy with an aggregate limit of $1 million, this means that the most the insurer would pay for all claims in that policy year would be capped at $1 million, regardless of the number or size of individual claims.

This concept is crucial for policyholders to understand because it helps in assessing how much risk they are assuming and how much coverage they actually have. Knowing that the aggregate limit exists can influence business decisions and risk management strategies.

In contrast, the other options focus on narrower interpretations of coverage limits that do not capture the comprehensive nature of the aggregate limit. For instance, a limit on property damage claims only would not encompass other types of liability claims that could occur. The maximum payout for any individual claim addresses only single incidents and disregards the overall cap for all claims combined. A limit that applies only to healthcare insurance wrongly narrows the applicability of the term, as aggregate limits are relevant across many insurance types