What is the term for the maximum limit of coverage available under a liability policy during a policy year?

The maximum limit of coverage available under a liability policy during a policy year is referred to as the aggregate limit of liability. This term is crucial in understanding how insurance policies work, particularly in commercial and liability contexts. The aggregate limit represents the total amount the insurer will pay for all claims made during the policy year, regardless of the number of claims.

For instance, if a policy has an aggregate limit of $1 million, the insurer will cover claims within that total limit throughout the policy period. Once the aggregate limit is reached, no further claims will be paid until the policy is renewed or re-established for the next term.

In contrast, the per-claim limit refers to the maximum payout for a single claim, while the retention limit pertains to the amount retained by the insured before insurance coverage kicks in. An excess limit refers to additional coverage beyond a certain threshold, which is not relevant in describing the overall maximum available during a policy year. Understanding these distinctions helps an individual navigate and comprehend liability coverage effectively.