What Is an Aggregate Limit?

An insurer will only pay out an aggregate limit up to a certain maximum amount to a policyholder for all losses that are covered during a specific time period, which is typically one year.

In most cases, insurance policies place limits not only on individual claims but also on the total amount paid out for claims. For instance, if an organization has an annual aggregate coverage limit of $20 million and during the course of a policy period claims amounting to a total of $25 million are submitted, the insurance company will only pay out $20 million.

Many different types of health insurance policies include aggregate limits.

This is a clause in the contract, and it is possible that it could also be called a general aggregate limit.

• The total amount that an insurer is obligated to pay out to a policyholder in a given time period is capped by an aggregate limit.

• Insurance policies frequently impose limits not only on the size of individual claims but also on the aggregate claims reimbursed.

• Some companies purchase stop-loss insurance in addition to their regular plans in order to protect themselves against any catastrophic losses.

Understanding  About the Aggregate Limit

As was mentioned, insurance policies typically impose caps on the amount of money that will be paid out in settlement of a single claim as well as the total amount that will be paid out to the policyholder in a given year.

For instance, a liability policy might have a limit of $25,000 for each individual claim and a total limit of $100,000 for the entire policy. Even though it falls below the policy's aggregate limit, the insurance company will only pay out the per-claim maximum of $25,000 in the event that the insured files a single claim for the full amount of $50,000. The new cap for the total amount is $75,000. A second claim of $50,000 made during the same period will result in an additional payout of $25,000 and will bring the total limit down to $50,000. Once the insurer has met the aggregate limit for the policy period, they will not pay any additional claims that are submitted.

There is also the possibility of "sub-limits" being included in an insurance policy. That is to say, there may be limits placed on the amount of compensation that one can receive for a certain category of damage, such as that caused by a flood or an earthquake.

Health Care Aggregate Limits

Similar to the illustration that was provided earlier, health insurance policies typically place a limit on the amount of money that will be paid out for individual claims as well as the total amount of money that will be paid out annually for claims.

There is also the possibility that a policy will have sub-limits, which set a maximum limit on the amount of money that will be reimbursed for certain categories of loss or damage.

When a family enrolls in a dental plan, the plan will pay a predetermined amount for each filling, cleaning, or crown that is needed. Additionally, the family will be subject to an annual aggregate limit on the amount of compensation that can be received for claims under the policy. In the event that the family spends more than the annual limit, they are responsible for paying the additional costs until the new policy term begins.

Coping with Aggregate Limits

The aggregate limits on some policyholders' standard policies may not be enough to cover catastrophic losses, so these policyholders may purchase additional insurance to cover the excess. Many insurance companies offer supplemental plans that come at an additional cost and provide coverage that is in excess of the aggregate limit of the base plan. These might have a specific limit, but it would be quite high, or they might not have any limit at all.

Similar stop-loss insurance may be utilized by employers who self-fund employee healthcare plans as a means of providing protection against potentially catastrophic claims. In a self-funded plan, the employer is responsible for covering the cost of any claims made by employees, up to a predetermined maximum. Because of this standard policy, the employer might be responsible for paying any costs that are in excess of the aggregate limit out of their own pocket.

There is also coverage available for stop-loss in the event of workers' compensation claims.

The employer has the option of purchasing a stop-loss policy, which provides reimbursement for any amount that is paid out in excess of the aggregate limit.