What is an Aggregate Limit in the context of dwelling policies?

An aggregate limit in the context of dwelling policies refers to a cap on the total claims allowed in a year. This means that during a policy period, the insurer will only pay out up to a specified total amount for all claims made by the policyholder. Once this limit is reached, the policyholder will not receive any further payouts for additional claims made within that same time frame, regardless of the number of incidents that may occur.

This concept is important for both insurers and policyholders as it helps to manage risk and control costs. Insurers use aggregate limits to protect themselves from excessively high payouts, while policyholders must be aware of these limits when planning for potential claims. Knowing the aggregate limit can influence decisions on coverage and overall financial planning in the event of multiple claims throughout the policy period.