Insurance policies have limits that define the maximum amount of coverage or compensation for a particular type of policy. This is the maximum that the insurance company would pay for that coverage. After a claim has reached the applicable deductible amount, the policy normally pays until the limit is reached, after which the policy will not provide any additional protection. It is common for an insurance policy to have different types of limits. Let us explore the three types of limits of insurance policies.
Aggregate Limits
The aggregate limit of an insurance policy establishes the maximum total compensation the insurance provider offers for the covered claims for a policy term. The aggregate claim is often used in situations where there are multiple claims within a given period. For example, if a policy’s aggregate cover is $1 million but there are multiple claims totaling $2 million are filed within that policy period, the insurance provider will only pay a maximum of $1 million. The policyholder will either need to renew or change their policy to get additional coverage. If you suspect you will need to file multiple claims, you can consider getting a policy with a high aggregate limit.
Per-Occurrence Limits
The pre-occurrence limit is the maximum amount for a single covered occurrence. This can include multiple claims that are related to a single event. If you have suffered severe losses in a single event, the pre-occurrence limit is an important number for you as that limits the compensation and no coverage available for your losses. Once the pre-occurrence limit is reached, the insurance policy will not offer any additional coverage for losses related to the particular event or occurrence.
Generally, the pre-occurrence limit remains the same regardless of how many people get injured or how much property gets damaged. If you believe you are at high risk of suffering substantial losses in a single event, you should get an insurance policy with a high pre-occurrence limit.
Sub-Limits
Sub-limits are a type of additional limitations on the insurance policy. The sub-limits are part of the original limits so they don’t provide any additional coverage. Instead, they set a maximum coverage or compensation amount for a specific loss. For example, if there is a $500,000 liability policy to cover lawsuits, there could be a 10% sub-limit to cover punitive damages. Similarly, for a homeowner’s insurance policy, if there is a total of $500,000 in coverage, there could be sub-limits that define the maximum that can go toward flood damage.
If you are an attorney who is looking to find information about insurance policies and coverage for your client, you can rely on policy limit tracing. Having accurate information can make a huge impact on your case. Policy limits tracing allows you to practice due diligence. In addition, you get a bigger picture on policy limits enabling you to make informed decisions about your case and stay ahead of the game when negotiating with the opposing side.
Read More: