Arkansas Property and Casualty Practice Exam

The term "aggregate limit" in liability insurance policies specifically refers to the maximum amount that an insurer will pay for all claims that occur during a specified policy period. This limit encompasses the total payout the insurer will cover, regardless of the number or type of claims made against the policy, as long as they fall within the policy's effective dates.

For example, if a liability policy has an aggregate limit of $1 million, the insurer will not pay more than that amount for all covered claims combined during the policy term. This concept is crucial for policyholders to understand because it affects their exposure to risk; once the aggregate limit is reached, any additional claims may not be covered, potentially leading to substantial out-of-pocket costs.

The options related to other concepts, such as deductibles, coverage limits on individual claims, and property value assessments, do not accurately describe the nature of an aggregate limit. Recognizing that the aggregate limit cap encompasses all claims within the defined period is essential for those managing liability risks.