How is “aggregate limit” defined in liability insurance?

In liability insurance, the term "aggregate limit" refers to the total coverage that an insurer will provide for all claims made during a specific policy term. This means that once the cumulative amount of all claims reaches this limit, the insurer is no longer responsible for paying additional claims that occur during that policy period.

This concept is crucial for policyholders to understand, as it defines the scope of protection available to them throughout the term of the policy. For example, if a liability policy has an aggregate limit of $1 million, the insured can make multiple claims within that term, but the total payouts by the insurer cannot exceed the $1 million threshold.

Other options describe different aspects of insurance coverage. The maximum deductible for individual claims pertains to what the insured must pay before the insurance kicks in, while the highest single claim amount relates to specific claim limits rather than the total for all claims combined. The amount an insured must pay out of pocket characterizes a deductible rather than the overall policy limit. Consequently, understanding that the aggregate limit encompasses the total coverage available for multiple claims is essential for effective risk management in insurance.