Aggregate Product Liability Limit

The aggregate product liability limit is the maximum payout an insurance company will make during the life or term of an insurance product.

The aggregate product liability limit is a set dollar amount on a property or liability policy which an insurance company will not be required to pay above. The amount remains unchanged, no matter how many claims are made per period, as long as neither the dollar amount nor time period have been exceeded.

This limit can be based either per occurrence, or for the life and term of the policy. Once the limit is reached the insured can no longer file claims against the policy, and any additional liability or repairs that are incurred will have to be made out of pocket by the insured. This preemptively protects the insurance company from excessive or ongoing losses.

The aggregate product liability limit may also be referred to as an annual aggregate limit.

For example, a homeowner has purchased a home in a hurricane prone area. The insurance company has placed an aggregate product liability limit at $250,000 in claims per year, or $500,000 over the life of the policy.

During a particularly bad hurricane season, the property sustains $350,000 in damages. The insured files a claim with their homeowners insurance company and receives a payment to cover $250,000 worth of damages, leaving the homeowner to come up with the additional $100,000. This has met the policy’s liability limit for the year. If the homeowner incurs any additional damages or losses during the policy year, they will have to pay for them out of pocket as well.

Now say the following year the property is struck again by loss, and experiences an electrical fire, causing an additional $100,000 in damages. If the policy year has passed, the homeowner can now submit a claim for the new damages, receiving the full $100,000. However, their remaining limit on life of policy claims has gotten closer to the maximum. Leaving them with only $150,000 for any future losses they may sustain, no matter what the nature of the claim.

At such time they will be faced with deciding which will be their best option moving forward. They may decide that it is finding a new homeowners insurance company, which will be required by the lender if they still hold a mortgage on the property, one that carries a higher product liability limit. Or they may opt to ensure that they have enough funds available to cover any future claims.

These limits do not just apply to homeowners insurance policies, and can be found on many different insuring platforms.