A contractor's general liability insurance policy has a $1,000,000 aggregate limit and $500,000 per occurrence limit. After three claims totaling $400,000, $300,000, and $250,000, how much coverage remains for additional claims?
Correct Answer
D) $50,000
Total claims = $400,000 + $300,000 + $250,000 = $950,000. Remaining aggregate coverage = $1,000,000 - $950,000 = $50,000
Why This Is the Correct Answer
The aggregate limit is the total amount the insurer will pay for all claims during the policy period. Total paid so far = $400,000 + $300,000 + $250,000 = $950,000. Remaining aggregate = $1,000,000 − $950,000 = $50,000. Note that each individual claim ($400K, $300K, $250K) was at or below the $500,000 per-occurrence limit, so per-occurrence was not a limiting factor — the aggregate is what constrains remaining coverage.
Why the Other Options Are Wrong
Option A: $500,000
$500,000 is the per-occurrence limit, not the remaining aggregate coverage. A candidate selecting this likely confused the per-occurrence limit with the remaining aggregate balance.
Option B: $0
$0 would be correct only if total claims equaled or exceeded $1,000,000. Total claims are $950,000, leaving $50,000 remaining. The policy is not yet exhausted.
Option C: $250,000
$250,000 has no basis in the calculation. It is the amount of the third claim, not the remaining coverage. This is a distractor for candidates who lose track of the arithmetic.
Memory Technique
Aggregate = the 'bucket' total. Per-occurrence = the 'single dip' max. Once the bucket ($1M) is drained by cumulative claims, no more coverage — regardless of how large the per-occurrence limit is. Here: $400K + $300K + $250K = $950K drained, $50K left.
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