Per Occurrence is the limit the insurance company must pay for the cost of covered damages. For further illustration, the insured’s policy states that his per occurrence limit is $1,000,000.00. Therefore, if the insured’s business is found legally responsible for one accident and causes property damage that costs $500,000, the insurance company will pay up to the limit of the covered damages with no deductibles in your claim.
Also, if the cost of covered damages ($1,200,000) exceeds the per occurrence limit, which is $1,000,000, the insured will be the one to pay for the difference out of his pocket.
The Aggregate Limit is how the insurance company is obligated to pay in one policy term. However, the aggregate limit is also subject to the per occurrence limit. So if the insured already reaches its aggregate limit, the insurance company will no longer pay for damages, even if it occurs during the policy period.
For further illustration, suppose that the insured’s roofers General Liability policy’s aggregate limit is $2,000,000. Furthermore, the roofer damages a client’s property that costs $1,000,000 in February. In September, a client filed a lawsuit against the roofer for defamation, which cost the roofer another $1,000,000 for legal fees.
In this situation, the insurance company will no longer pay for any cost of damages. Also, the company won’t pay for the damages that could occur in the policy period’s succeeding months because the policy has been exhausted. In other words, the insured already reaches its aggregate limits.