Limits & deductibles

The most the policy will pay for all claims in one policy period, no matter how many claims there are.

The aggregate limit is the total amount an insurer will pay for all covered claims during a single policy period. It sits above the per-occurrence limit, which caps what any one claim can pay.

Why it matters: A $1 million per occurrence / $2 million aggregate policy pays up to $1 million on any single claim and up to $2 million total for the year. Three $800,000 claims in one year exhaust the aggregate at $2 million and the third claim is partly uninsured.

A property clause requiring you to insure to a stated percentage of value. Insure too low and even partial claims are reduced.

A coinsurance clause requires the insured to carry a limit equal to at least a stated percentage — commonly 80, 90 or 100 percent — of the property’s value. If the limit is lower, claim payments are reduced proportionally by a coinsurance penalty.

Why it matters: This is the mechanism that punishes under-insurance, and it applies to partial losses, which are the overwhelming majority. Insure a $1 million building for $600,000 under an 80 percent clause and a $200,000 loss pays roughly $150,000 before the deductible, not $200,000.

The amount you pay on a claim before the insurer pays anything. Raising it is the most reliable way to lower premium.

A deductible is the portion of a covered loss the insured retains before the policy responds. It can be a flat dollar amount, a percentage of the insured value (common for wind and hail), or applied per occurrence, per claim or annually.

Why it matters: Deductibles exist to remove small claims from the system, and they are the cleanest lever you control on price. Moving a general liability deductible from $1,000 to $5,000, or a property deductible from $2,500 to $10,000, frequently produces a double-digit premium reduction.

Whether legal fees eat your policy limit or sit on top of it. Often the biggest real difference between two identical-looking quotes.

Defense costs inside the limits — sometimes called eroding, wasting or defense-within-limits — reduce the amount available to pay a settlement or judgment. Defense outside the limits is paid in addition to the policy limit.

Why it matters: On a $1 million policy that spends $300,000 on defense, inside-limits treatment leaves $700,000 to settle with. Outside-limits treatment leaves the full $1 million. On defense-heavy claims that is a decisive difference and it never appears on a certificate.

The most the policy pays for any single claim or event, regardless of how many people were hurt.

The per occurrence limit is the maximum an insurer will pay for all damages arising out of a single occurrence, however many claimants are involved, subject to the policy aggregate.

Why it matters: One incident can injure several people and still be one occurrence against one limit. A ladder falling into a crowd, a vehicle accident with multiple vehicles, a food illness outbreak affecting a dozen customers — these are typically single occurrences, which is why the limit should be sized against the worst realistic single event rather than the average claim.

The most the policy pays for any single claim. On claims-made policies it is the number that gets tested.

A per-claim limit is the maximum an insurer will pay for a single claim, regardless of the number of claimants or the number of alleged acts, separate from and subject to the policy aggregate.

Why it matters: On professional liability the per-claim limit is where the exposure sits, because a single client engagement can generate one large claim rather than many small ones. Matching it to your largest project value, not your average, is the right test.

The part of general liability that responds after you have finished the job or sold the product.

Products-completed operations coverage responds to bodily injury or property damage arising out of the insured’s products or out of work that has been completed or abandoned. It carries its own aggregate limit, separate from the general aggregate.

Why it matters: For contractors and manufacturers, this is where the claims actually land. A defect surfaces two years after completion; a product injures someone after it is sold. The general aggregate does not respond to those — the products-completed operations aggregate does.

Like a deductible, but you also handle and fund the defense until the retention is exhausted.

A self-insured retention is an amount the insured must pay on a claim before the policy responds, differing from a deductible in that the insurer’s duty to defend and pay generally does not attach until the SIR is satisfied — so the insured funds and often manages the early defense.

Why it matters: With a deductible, the carrier typically handles the claim from day one and bills you the deductible. With an SIR, the claim is yours until the retention is met, which means selecting counsel, controlling strategy and paying invoices out of operating cash.