A contractor's general liability insurance policy has aggregate limits of $1,000,000 and per-occurrence limits of $300,000. After two claims totaling $500,000, what coverage remains for the policy period?
Correct Answer
C) $300,000 per occurrence, $500,000 aggregate
Per-occurrence limit remains $300,000, but aggregate is reduced by paid claims: $1,000,000 - $500,000 = $500,000 remaining aggregate.
Why This Is the Correct Answer
The per-occurrence limit is fixed at $300,000 per incident regardless of how many claims have been paid — it resets for each new occurrence. The aggregate limit, however, is reduced by all paid claims during the policy period: $1,000,000 − $500,000 = $500,000 remaining aggregate. So the remaining coverage is $300,000 per occurrence with $500,000 aggregate still available.
Why the Other Options Are Wrong
Option A: $200,000 per occurrence, $500,000 aggregate
$200,000 per occurrence is incorrect. The per-occurrence limit does not decrease as claims are paid. It remains $300,000 for each new incident throughout the policy period. Only the aggregate decreases.
Option B: $0 remaining coverage
$0 remaining is wrong. The aggregate has not been exhausted — $500,000 remains after $500,000 in claims against a $1,000,000 aggregate. Claims would need to reach $1,000,000 total to exhaust coverage.
Option D: $300,000 per occurrence, $1,000,000 aggregate
$1,000,000 aggregate remaining is incorrect. The aggregate limit is not a fixed per-claim limit; it is a running total that decreases with each paid claim. After $500,000 in claims, only $500,000 of aggregate coverage remains.
Memory Technique
Think of aggregate as a bank account: every paid claim makes a withdrawal. Think of per-occurrence as a coupon: each new incident gets a fresh coupon worth $300,000, regardless of how many coupons were previously redeemed. Bank account can run out; each coupon is always full value.
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