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What is an Aggregate Limit?

Marina Martin
Marina Martin

An aggregate limit refers to the maximum amount of money that can be paid or borrowed. While this limit usually refers to a lifetime maximum, a specific time limit, such as one year, may apply. At the end of the time frame, the limit typically resets. Limits apply to many types of payment or loans, including student loans, insurance payouts and salaries.

In terms of student loans, an aggregate limit refers to the maximum amount a student may borrow to fund their education. Once a student borrows the full amount of the limit, she cannot borrow any additional funds from that source, even if she has not finished her education. However, the aggregate limit of the original lending source is not likely to apply to future lenders; the outstanding amount of her debt, though, may affect her ability to borrow additional funds.

Man climbing a rope
Man climbing a rope

An aggregate limit in the insurance industry refers to the maximum amount that a particular policy will pay out. The policy may specify a lifetime or annual limit. Any claim amount exceeding the limit is typically the responsibility of the policy holder. For example, if an insurance policy has a $10 million US Dollar (USD) limit, and $8 million USD in claims are applied, the policy will pay all the claims. However, if $12 million USD in claims are applied, then the insurer will pay $10 million USD, and the insured will be responsible for $2 million USD. Aggregate limits are standard for most types of insurance, including health insurance and indemnity insurance, and commonly apply to plans ranging from first dollar coverage policies, which have no deductible, to high-deductible policies.

The aggregate limit should be carefully considered when selecting an insurance policy. If the limit is not high enough to cover costs, the insured will have to pay all additional costs personally, which could lead to bankruptcy. Having a high enough limit is of particular concern when it comes to indemnity insurance, such as malpractice insurance. If a jury decides the malpractice charges are warranted and that the accused acted in a particularly malicious way, it may award treble damages, which means tripling the original damage award. A single case of treble damages may exceed an insurance policy's limit.

Certain expenses may be exempt from the aggregate limit. For example, most government positions have a limit for annual salaries based on the level of the position. However, severance pay, overtime pay and certain other forms of compensation typically do not apply to the aggregate limit. A government employee, for example, could not receive a base salary in excess of the established limit, but she could receive payment beyond this amount in the form of overtime or severance pay.

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