Why General Aggregate Matters in Your Insurance Policy

Are you familiar with the term "general aggregate" in your insurance policy? If not, don't worry – you're not alone. While it may sound like another complex insurance jargon, understanding its significance is crucial for protecting yourself and your assets. In this blog post, we will break down why general aggregate matters in your insurance policy and unravel its importance in keeping you covered when unexpected events occur.

Introduction to General Aggregate

Insurance policies typically have two different types of coverage: named perils and open perils. Named perils insurance covers specific risks that are listed in the policy, while open perils insurance covers all risks except those specifically excluded in the policy. General aggregate is a limit of liability that applies to open perils insurance.

This means that if you have an open perils policy, your insurer will only pay out up to the general aggregate limit for any claims that are not specifically excluded in your policy. The general aggregate limit is typically higher than the individual limits for each type of covered peril, so it provides additional protection in case of multiple claims.

If you have a named perils policy, there is no general aggregate limit; instead, each type of covered peril has its own individual limit. This means that if you make multiple claims for different types of covered perils, each claim will be paid up to its individual limit (subject to the deductible).

The general aggregate limit is one reason why open perils insurance is often more expensive than named perils insurance. However, it also provides greater protection against unforeseen events.

How Does General Aggregate Affect Your Insurance Policy?

If you have a commercial insurance policy, you’re likely aware of the term “general aggregate.” But what does it mean, and how does it affect your coverage?

Simply put, the general aggregate is the maximum amount that your insurer will pay out for all claims under your policy during the policy period. This limit applies regardless of the number of claims filed or the amount of damages incurred.

Once the general aggregate limit is reached, your insurer will not pay any additional claims – even if they’re valid – until the next policy period begins. That’s why it’s important to understand this limit and make sure you have adequate coverage in place.

There are a few things to keep in mind when it comes to the general aggregate limit:

- The limit is per occurrence: This means that if you have multiple claims during the policy period, each one will be counted towards the limit. For example, if your policy has a $1 million general aggregate limit and you have two separate claims that each incurs $500,000 in damages, your insurer will only pay out a total of $1 million.

- The limit is often shared: If you have a multi-line policy (e.g., property and liability), chances are that the general aggregate limits for each line of coverage are combined into one overall limit.

What is the Difference Between Specific and General Aggregate Insurance?

There are two types of aggregate limits in insurance policies: specific and general. Specific aggregate limits apply to a single type of loss, while general aggregate limits apply to all types of losses.

General aggregate limits are important because they protect the policyholder from incurring more than their limit in total damages. For example, if a policyholder has a $500,000 general aggregate limit and suffers $600,000 in damages from a fire, the policy will only pay out $500,000. The policyholder would then be responsible for paying the remaining $100,000 out of pocket.

Specific aggregate limits work similarly, but only apply to a single type of loss. So, if a policyholder has a $250,000 specific aggregate limit for fire damage and suffers $300,000 in fire damage, the policy will only pay out $250,000. As with general aggregate limits, the policyholder would be responsible for paying the remaining damages out of pocket.

It’s important to note that some insurance policies have both specific and general aggregate limits. In these cases, the total amount paid by the policy will never exceed the general aggregate limit, even if there are multiple instances of covered losses.

How Do You Calculate Your General Aggregate Limit?

Your general aggregate limit is the most your insurance company will pay for all the damages caused by a single occurrence. To calculate your general aggregate limit, you need to add up the limits on all the coverage parts in your policy that apply to bodily injury or property damage.

For example, let’s say you have a $500,000 per occurrence limit on your commercial general liability (CGL) coverage and a $100,000 limit on automobile liability. If someone sues you for damages after they were injured in a car accident that was your fault, your insurance company would pay out a maximum of $600,000 ($500,000 + $100,000).

It’s important to note that some policies have separate general aggregate limits for different coverage parts. So if you have a CGL policy with a $1 million general aggregate limit and an automobile policy with a $500,000 general aggregate limit, your total protection would be $1.5 million.

Strategies for Choosing the Right Amount of Coverage

There are a few things to consider when trying to determine how much general aggregate insurance coverage you need. The first is the size of your business. If you have a large company with many employees, you will most likely need more coverage than a smaller business. The second thing to consider is the type of business you have. If you have a high-risk business, you will need more coverage than a low-risk business. You need to consider the value of your assets. If you have a lot of valuable assets, you will need more coverage than someone with fewer assets.

Conclusion

All in all, it is essential to fully understand the general aggregate limit and how it relates to your policy before you sign up. With a better understanding of what this provision means for your insurance policy, you can be more confident that you have the coverage needed in the case of an emergency. If you need additional guidance on this subject or any other related topics, be sure to talk with your insurer and find out how they can help protect you from potential risks.