A contractor's general liability insurance has a $1 million per occurrence limit and a $2 million aggregate limit. After two claims totaling $1.8 million, how much coverage remains for the policy period?
Correct Answer
A) $200,000
The aggregate limit is the maximum the insurance will pay for all claims during the policy period. With a $2 million aggregate and $1.8 million in claims, $200,000 remains in coverage.
Why This Is the Correct Answer
The aggregate limit represents the maximum total amount the insurance company will pay for all claims during the entire policy period, regardless of how many separate incidents occur. Since $1.8 million has already been paid out in claims against the $2 million aggregate limit, only $200,000 remains available for any additional claims during this policy period. The per occurrence limit becomes irrelevant once we're calculating remaining aggregate coverage.
Why the Other Options Are Wrong
Option B: $0
This incorrectly assumes all coverage is exhausted, but since the claims total ($1.8 million) is less than the aggregate limit ($2 million), coverage still remains available.
Option C: $800,000
This incorrectly assumes the per occurrence limit ($1 million) represents the remaining coverage, but the per occurrence limit only applies to individual claims, not total remaining coverage for the policy period.
Memory Technique
Think 'Aggregate = All Together' - the aggregate limit covers ALL claims for the entire policy period, so subtract what's been used from the total available.
Reference Hint
Florida Building Code - Chapter 1, Section on Insurance Requirements and Definitions
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