The aggregate limit is the upper limit of money the insurer will pay for the loss which have happened during policy period. This type of limit covers many losses at once, and all of them are covered as long as their total amount does not exceed the aggregate limit. Usually, in a lot of cases, every single loss is covered to an unlimited value, as long as the aggregate limit is not exceeded by the value of this loss. It may also happen, that there is a limit set for each loss, so that aggregate limit is not consumed by only one of them.
Aggregate limit in history
A great example of an aggregate limit is the debt limit which was established by the US Congress in 1939. This was the first-ever limit to cover most of the public debt. Thanks to it, the Treasury was able to lessen interest costs by issuing debt instruments maturities and reduce financial risk. In contrary to the fact that the Treasury has become more independent, the debt limit right before the start of World War II was significantly closer to the total federal debt than right after World War I. In 1919 the maximum allowable federal debt was $43 billion, while total federal debt was $25.5 billion. In 1939 total federal debt was $40.4 billion with the debt limit of $45 billion.
General aggregate limit and products/completed operations aggregate limit
The aggregate limit can be divided into two kinds of limits:
- The general aggregate limit which covers every sublimit, except those covered by The Products/Completed Operations Aggregate Limit, it is equal to the total amount which is guaranteed by the policy minus products and completed operations coverage.
- The products/completed operations aggregate limit is not limited by the general aggregate limit and may affect other sublimits.
General aggregate limit and products/completed operations aggregate limit may be further divided into different sublimits, for instance:
- The occurrence limit covers several losses such as damage of property, medical bills caused by an accident or bodily damage. It may be a part of both of either of the Aggregate Limits.
- The medical expense limit is the upper limit of money a person can receive to cover medical bills from a bodily injury.
- Clore D. L. 2008, p. 932
- Code of Federal Regulations Title 12 Banks and Banking 2008, p. 461
- Austin D. A., Levit M. R., p. 3
- Russel D. 2004 p.469
- Russel D. 2004 p.469
- Austin D. A., Levit M. R. (2010)., The Debt Limit: History and Recent Increase}, DIANE Publishing, Darby, p. 3
- Clore D. L. (2008)., Financial Institution Bonds, American Bar Association, Chicago, p. 932
- Code of Federal Regulations Title 12 Banks and Banking(2008), Office of the Federal Register, Washington, p. 461
- Ostrager B. R, Newman T. R. (2012)., Handbook on Insurance Coverage Disputes, Wolters Kluwer, Alphen aan den Rijn, p. 868-689
- Russel D. (2004)., Insuring the Bottom Line: How to Protect Your Company From Liabilities, Catastrophes and Other Business Risks, Silver Lake Publishing, Aberdeen, p. 469
Author: Kacper Klimek