Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 20, 2021

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You may or may not know that commercial insurance policies typically have more than one limit of liability associated with differing coverage.

For example, a commercial general liability policy may have a separate limit of liability for premises and operations coverage, personal and advertising injury, and products and completed operations, all of which are separate coverage types.

Further, there may also be differing limits for medical payments to others coverage, which is a type of no-fault insurance.

All coverage is subject to an “each occurrence” (also referred to as a “per occurrence”) and an “aggregate” liability limit.

These two limits are designed to specify how much money the insurer is willing to pay, in total, for damages that result from covered causes of loss (insurance claims).

Let’s explore what these terms mean with regard to a commercial insurance policy.

What is covered under a commercial general liability insurance policy?

The exact make-up of a commercial general liability policy will vary depending on the insurance provider and the coverage options chosen by the insured. However, the basic coverage for this type of policy includes:

  • Bodily injury and property damage liability coverage
  • Personal and advertising injury coverage
  • Medical payments coverage

This policy pays for medical expenses if an employee or customer is hurt inside your business or as a result of one of your employee’s actions. It will also cover legal costs associated with a personal injury, wrongful termination, or other type of lawsuit.

Your business liability insurance company may have additional coverage options available, such as damage to premises rented coverage, errors and omissions insurance, and liquor liability insurance.

Commercial liability insurance policies are vital for businesses. Without this type of coverage, your business could easily go bankrupt after a single injury or property damage incident.

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What is an “each occurrence” liability limit?

It’s possible to have multiple claims made against a policy within a single 12-month policy term.

The “each occurrence” limit is the maximum amount an insurer will pay for damages resulting from one claim or from a single claim.

Imagine if a convenience store (a very unlucky one) were to have two claims in the same year.

Each liability claim would be subject to a maximum pay out for damages. Both insured parties would be able to collect a maximum of $100,000 in damages if the “each occurrence” limit was $100,000.

In fact, up to $100,000 in insurance money would be available to an unlimited number of injured claimants within the term of a single insurance policy.

The claims payments could easily get out of control in the event multiple people were hurt throughout the course of one policy term.

Insurance policies have a stop-gap in place to protect the insurance company from the potential of multiple claims in one year; known as the policy aggregate limit.

What is an aggregate liability limit?

Commercial insurance policies are subject to an aggregate liability limit in order to protect themselves against paying for multiple liability claims within a policy term.

The aggregate limit is the maximum amount of money an insurer will pay for covered claims within one policy period…regardless of how many claims are filed.

Let’s assume the convenience store’s liability policy had an aggregate limit of $300,000.

Perhaps as many as five different people sued the store for $100,000 in five separate occurrences.

The insurance policy would respond to each claim by paying the necessary amount of damages until the policy aggregate limit was reached.

No individual would be able to collect more than $100,000 (the “each occurrence” limit).

Once the policy aggregate limit was reached, the insurer would wipe their hands of additional claims, leaving the store owner to settle (and hopefully keep their floor dry from now on).

As discussed above, there are multiple different liability limits available on commercial insurance policies.

Look closely at your insurance contract and contact your insurer or insurance agent if you have any concern regarding your coverage limits.

Commercial liability premiums vary, so get insurance quotes from multiple companies before choosing a policy.