What does "aggregate limit" refer to in commercial insurance?

The term "aggregate limit" in commercial insurance specifically refers to the maximum amount the insurer will pay for all claims that occur during a specified policy period, typically one year. This limit acts as a ceiling on the insurer's liability, ensuring that there is a definitive upper limit to their financial exposure for multiple claims that might arise from various incidents within that time frame.

In the context of commercial insurance, businesses can face numerous risks and potential claims throughout the year, and the aggregate limit provides protection by defining the total payout the insurer is obligated to make. This helps manage both the insurer's risk and the policyholder's expectations regarding the coverage available for multiple claims.

Understanding this distinction is crucial, as it enables businesses to assess their coverage needs adequately and avoid underinsuring themselves. It also highlights how aggregate limits differ from other types of limits in a policy, such as per occurrence limits, which cap the amount payable for any single event.