What is per-occurrence vs aggregate limits?

Understanding the relationship between per-occurrence and aggregate limits is fundamental to knowing how much protection your insurance actually provides. These two limits work together to define the boundaries of your coverage, and misunderstanding them can leave your business dangerously underinsured.

The per-occurrence limit is the most your insurance company will pay for a single covered incident. If your policy has a $1 million per-occurrence limit and your crew drops a tree on a house causing $750,000 in damages plus $200,000 in injury claims to occupants, the total $950,000 falls within your per-occurrence limit and is fully covered (less any deductible). However, if that same incident generated $1.3 million in total claims, your policy would pay $1 million and you would be responsible for the remaining $300,000 out of pocket.

The aggregate limit is the total amount your insurer will pay for all covered claims during the policy period (typically one year). With a $2 million aggregate, your policy has $2 million available for the entire year. If you have three separate $500,000 claims, your aggregate is reduced to $500,000 for the remainder of the policy period. Once the aggregate is exhausted, you have no coverage for additional claims until the policy renews — a dangerous position for any tree service company.

For tree service companies, the standard $1M/$2M limit structure means you have coverage for up to two maximum-severity claims per year before exhausting your aggregate. Companies with high claim frequency or those performing particularly hazardous work (crane operations, utility line clearance) should consider higher aggregate limits. Options include purchasing a policy with higher base limits (such as $2M/$4M) or adding a commercial umbrella policy that provides both excess per-occurrence and excess aggregate coverage.

Some policies offer a separate products-completed operations aggregate, which provides a dedicated aggregate for claims arising from completed work. This is valuable because it means completed operations claims do not erode the aggregate available for ongoing operations claims. Ask your broker whether your policy includes this feature.

Monitor your aggregate throughout the policy year. If a significant claim erodes your aggregate early in the policy term, you may need to purchase aggregate reinstatement coverage to restore your limits. Your broker can advise on whether this option is available and cost-effective. Running with a depleted aggregate leaves your business exposed to catastrophic uninsured loss.