What is 'aggregate limit' in the context of insurance?

In insurance, the term 'aggregate limit' refers to the maximum amount an insurer will pay for all claims combined during a specified policy period. This limit defines the insurer's overall exposure and liability across multiple claims, ensuring that after reaching this cap, the insurer will not pay any additional claims, regardless of their individual amounts.

The aggregate limit is particularly important in policies such as general liability insurance, where a business may face multiple claims within the coverage period. By establishing a clear financial boundary, the aggregate limit helps both the insurer and the insured manage risk effectively.

In contrast, other options describe different aspects of insurance. The minimum coverage required for a specific type of policy addresses the basic amount of protection mandated by law or regulation, while limits on individual claims pertain to how much can be claimed for each separate incident or loss. Lastly, the total premium over the life of the policy relates to the cost of maintaining coverage, which is unrelated to the claim payment limits. This distinction underscores the specific role of the aggregate limit in insurance contracts.