What is defined as the maximum limit of coverage available under a liability policy during a policy year?

The concept of the maximum limit of coverage available under a liability policy during a policy year is best defined as the aggregate limit of liability. This aggregate limit represents the total amount that an insurer will pay for all claims combined within a specific policy year, regardless of the number of occurrences that may occur.

This limit is crucial for policyholders, as it helps them understand the overall cap of their coverage throughout the year, giving insight into how many claims they can file and the potential maximum payout available for all claims made. The aggregate limit is particularly significant in businesses that may face multiple claims over the course of a year, allowing them to assess the breadth of their financial protection.

In contrast, a per occurrence limit refers to the maximum amount allowed for a single claim or event, which is separate from the total available for all claims combined. The combined single limit refers to a type of liability coverage that provides a single limit for both bodily injury and property damage claims, which is distinct from the aggregate limit of liability. Policy limit is a broader term that can refer to any defined limit set forth in a policy, without specifically addressing the annual nature of the aggregate limit.