What is an aggregate limit?
Professional Indemnity and Directors’ & Officers’ Liability policies have an aggregate limit of indemnity or sum insured. This means that a policy may have a sum insured of $5,000,000 any one claim but that is also the total amount that will be paid in a policy year. Therefore, if a $5,000,000 claim is paid at the beginning of the year, there will be nothing left to pay any further claims that arise later on. It is possible to purchase one or more automatic reinstatements on the policy, which means that if a claim is paid, the sum insured is automatically reinstated to its original limit. One automatic reinstatement, for example, allows the aggregate limit to double but it should be noted that the limit for any one claim remains the same, e.g. $5,000,000 any one claim and $10,000,000 in the aggregate.
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