What is defined as the maximum amount an insurer will pay for all claims during a specified policy period?

The maximum amount an insurer will pay for all claims during a specified policy period is known as the aggregate limit. This limit reflects the total cap on the insurer's liability for claims covered under a policy, ensuring that once this amount is reached, the insurer will no longer provide coverage for additional claims until the policy is renewed or the limit is reset.

For instance, if an insurance policy has an aggregate limit of $1 million, this means that throughout the policy period, the insurer cannot pay more than $1 million in total for any and all claims made in that timeframe, regardless of the number of incidents. This concept is critical in understanding how liability insurance functions, as it provides both the insurer and the policyholder with a clear understanding of the financial exposure related to claims over the policy period. This structure helps in controlling the insurer's risk and ultimately impacts premium costs.

In contrast, other terms like per occurrence limit pertain to individual incidents rather than the total for the policy period. A deductible is an amount the insured must pay before the insurance coverage kicks in. Liability coverage pertains to the type of coverage offered and does not specify a payment limit over time.