How is "Aggregate" defined in insurance terms?

In insurance terms, "Aggregate" refers to the total amount of coverage that is available for all claims or incidents over a specified period, typically a policy year. This means that if a policy has an aggregate limit, it sets a cap on the total dollar amount that the insurer will pay out for all claims combined within that time frame. This aggregate limit is crucial for policyholders to understand, as it influences the overall risk management strategy and helps them gauge their coverage adequacy.

For example, if a business has a general liability policy with an aggregate limit of $1 million, this indicates that the total payout for all claims made during that policy period cannot exceed $1 million, regardless of how many separate claims are filed. This is a key concept in property and casualty insurance, influencing both policy costs and coverage options.

In contrast, other concepts like the limit of coverage for individual claims pertains to specific claims rather than the overall coverage limit, which does not capture the cumulative aspect that "aggregate" entails. Understanding this is vital for both policyholders and insurers in managing risks effectively.