Explain the difference between per occurrence and aggregate liability limits.

Explain the difference between per occurrence and aggregate liability limits.

• A. Per Occurrence Applies to a Single Event; Aggregate Is the Total for All Events During the Policy Period
• B. Per Occurrence Is the Total Yearly Limit; Aggregate Applies to Each Event
• C. Per Occurrence Applies to Property Claims; Aggregate Applies to Liability Claims
• D. Per Occurrence Is Higher Than Aggregate Always

Answer: (A)

The main idea is how liability limits cap payments for claims under a policy. A per occurrence limit is the maximum the insurer will pay for damages arising from a single event. The aggregate limit is the total the insurer will pay for all claims during the policy period, no matter how many events occur. So, for one incident you can be paid up to the per occurrence amount; across the whole year, you can be paid up to the aggregate amount in total. Once the aggregate limit is reached, no further payments are available for the remainder of the policy period, even if individual events would fall under their per occurrence limit. The other statements don’t fit because the per occurrence limit isn’t the yearly total, and the aggregate isn’t tied to each individual event in that way. Both limits typically apply to liability claims, not one to property and the other to liability. And there isn’t a rule that per occurrence is always higher than the aggregate; the relationship depends on the specific policy wording.

The main idea is how liability limits cap payments for claims under a policy. A per occurrence limit is the maximum the insurer will pay for damages arising from a single event. The aggregate limit is the total the insurer will pay for all claims during the policy period, no matter how many events occur. So, for one incident you can be paid up to the per occurrence amount; across the whole year, you can be paid up to the aggregate amount in total. Once the aggregate limit is reached, no further payments are available for the remainder of the policy period, even if individual events would fall under their per occurrence limit.

The other statements don’t fit because the per occurrence limit isn’t the yearly total, and the aggregate isn’t tied to each individual event in that way. Both limits typically apply to liability claims, not one to property and the other to liability. And there isn’t a rule that per occurrence is always higher than the aggregate; the relationship depends on the specific policy wording.