Aggregate deductible is the highest sum paid out-of-pocket for covered expenses that has to be paid before insurance company will pay the remaining costs. Aggregate deductible is usually related to product liability policy.
Manufacturer in order to reduce risk of mass production can purchase product liability insurance. If the problem occurs, the claims are first covered by manufacturer to the level of aggregate deductible and then by insurer. The deductible is called aggregate because it is aggregated along all the claims related to insured product.
Aggregate deductible can be also used in other types of insurance polices, e.g. family health insurance plans. The cap is then set on whole family costs, not the individuals.
- Baranoff, E. G. (2000). Determinants in risk-financing choices: the case of workers compensation for public school districts. Journal of Risk and Insurance, 265-280.
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