What Is General Aggregate Coverage in Insurance?

Commercial General Liability (CGL) insurance protects businesses from financial losses due to property damage, bodily injury, and other liabilities arising from operations. Within a CGL policy, general aggregate coverage is a fundamental component. It establishes the maximum amount an insurer will pay for covered claims over a defined period, typically one year. Understanding this limit helps businesses manage their potential liabilities.

Defining General Aggregate Coverage

The general aggregate limit represents the total financial commitment an insurance company will fulfill for all covered losses during a specific policy period. It functions as a cap on the total amount the insurer pays, irrespective of the number of individual incidents or claimants.

Once the cumulative payouts for claims reach this maximum, the insurer’s responsibility is exhausted. Any additional claims during that period would then need to be covered by the business directly. Upon renewal of the policy, this general aggregate limit typically resets, reinstating the full coverage amount for the upcoming year. This mechanism provides a defined boundary for the insurer’s financial exposure.

How General Aggregate Coverage Interacts with Other Policy Limits

Commercial General Liability policies include various limits. A distinct limit is the “per occurrence limit,” which sets the maximum amount an insurer will pay for damages arising from a single incident or claim. For example, a policy might have a $1 million per occurrence limit, meaning no single event will trigger a payout exceeding this amount, even if the total damages are higher.

In contrast, the general aggregate limit is the total maximum the insurer will pay for all covered occurrences combined during the entire policy period. While the per occurrence limit applies to each individual event, the general aggregate limit acts as an overarching cap on all such payments throughout the year. If multiple claims occur, each might be paid up to its per occurrence limit, but their sum cannot exceed the general aggregate.

Another specific limit is the “products-completed operations aggregate limit.” This separate aggregate covers claims for bodily injury or property damage arising from a business’s products or completed work after it has been delivered or finished. It operates independently of the general aggregate limit, meaning payouts under the products-completed operations aggregate do not reduce the general aggregate, and vice versa. This separation manages liability from core operations and premises separately from risks associated with finished products or services.

Other specific limits, such as those for personal and advertising injury or medical payments, are sub-limits that contribute to the general aggregate. Payments made under these specific coverages will reduce the remaining amount available under the general aggregate limit. These limits provide comprehensive protection while establishing clear financial boundaries.

What Counts Towards the General Aggregate Limit

The general aggregate limit is reduced by payments made for claims related to bodily injury and property damage occurring on the business’s premises or arising from its ongoing operations. This includes common scenarios such as a customer slipping and falling, resulting in an injury, or accidental damage to a third party’s property while business activities are underway. These types of claims directly draw down the available aggregate coverage.

Claims for “personal injury” and “advertising injury” also count towards the general aggregate limit. Personal injury, in this context, refers to non-physical harms such as libel, slander, false arrest, wrongful eviction, or invasion of privacy. Advertising injury covers offenses like copyright infringement, misappropriation of advertising ideas, or defamation in promotional materials. Any payouts for these specific types of claims will reduce the general aggregate.

The treatment of defense costs can vary by policy. Some commercial general liability policies state that defense costs do not reduce the limit of insurance. However, other policies may include legal fees and litigation costs as part of the total payout that counts towards exhausting the aggregate limit. Businesses should review their specific policy language to understand how defense costs impact their remaining aggregate coverage. Payments for medical expenses, which cover immediate medical costs for individuals injured on the premises regardless of fault, also reduce the general aggregate limit.

Why General Aggregate Coverage Matters for Your Business

Understanding general aggregate coverage helps businesses avoid unexpected financial exposure. If the general aggregate limit is exhausted during a policy period, the business becomes responsible for covering any additional covered claims out-of-pocket. This can lead to substantial, unforeseen expenses that could strain a business’s finances.

Selecting an appropriate aggregate limit directly impacts a business’s financial security. Businesses with higher risk exposures, such as those in manufacturing or construction, or those with significant public interaction, require higher limits to protect against multiple or large claims. Periodically reviewing insurance coverage with an insurance professional ensures that the aggregate limits remain suitable for the business’s evolving risk profile and operational scale.