What does "aggregate limit" refer to in liability insurance?

The term "aggregate limit" in liability insurance refers to the maximum amount that an insurer will pay for all claims made during a specific policy period. This limit is crucial for policyholders to understand because it represents the total coverage available to them for various claims throughout the policy term, ensuring that they know the extent of their financial protection.

For instance, if a liability insurance policy has an aggregate limit of $1 million, this means that the insurer will cover up to that amount for the total of all claims within the policy year. Once that limit is reached, the insurer will not cover any further claims until a new policy period begins, which resets the available coverage.

The other options do not accurately capture the concept of an aggregate limit. The minimum amount an insurer will pay does not pertain to the aggregate limit, as it typically refers to deductibles or coverage thresholds. The maximum amount paid for one claim relates to what's known as a "per occurrence limit," which is different from the aggregate limit. Finally, the total value of assets covered under the policy is a broader measure of the policy's coverage and does not specifically define the aggregate limit.