Texas All Lines Adjuster Practice Test

Which type of limit typically establishes the total insurer payout across multiple claims?

1. Occurrence Limit

2. Aggregate Limit

3. Incident Limit

4. Policy Limit

The correct answer is: Aggregate Limit

The aggregate limit is designed to establish the total amount that an insurer will pay for all claims over a specific policy period, regardless of the number of incidents or occurrences. This type of limit provides a cap on the insurer's overall liability, ensuring that claims payouts do not exceed a certain threshold, even if multiple claims arise. For example, in liability insurance, the aggregate limit specifies the maximum amount the insurer will cover for all claims made during the policy term, reflecting the insurance company's exposure to risk and helping to control potential losses in the event of multiple claims. Other limits, such as occurrence limits or incident limits, focus more on specific claims rather than establishing a total payout cap across multiple claims, making the aggregate limit particularly significant for policyholders and insurers in understanding the extent of coverage available during the life of the policy.