A Michigan contractor's current insurance policy has aggregate limits of $600,000 and per-occurrence limits of $300,000. After two claims totaling $450,000, what coverage remains available?
Correct Answer
D) $150,000 aggregate, $300,000 per occurrence
Aggregate coverage is reduced by claims paid ($600,000 - $450,000 = $150,000), but per-occurrence limits reset for each new claim.
Why This Is the Correct Answer
The aggregate limit is the total amount the insurer will pay across all claims during a policy period. After $450,000 in claims, only $150,000 of aggregate coverage remains ($600,000 - $450,000 = $150,000). However, per-occurrence limits do NOT decrease with claims — each new incident is still subject to the full $300,000 per-occurrence limit. Therefore, remaining coverage is $150,000 aggregate / $300,000 per occurrence.
Why the Other Options Are Wrong
Option A: $150,000 aggregate, $150,000 per occurrence
$150,000 aggregate is correct, but $150,000 per occurrence is wrong. Per-occurrence limits are not reduced by prior claims — each new occurrence is still covered up to $300,000 (subject to the remaining aggregate).
Option B: $600,000 aggregate, $300,000 per occurrence
$600,000 aggregate / $300,000 per occurrence would only be correct if no claims had been filed. After $450,000 in claims, the aggregate is reduced.
Option C: $300,000 aggregate, $150,000 per occurrence
$300,000 aggregate / $150,000 per occurrence is incorrect on both counts. The aggregate should be $150,000 (after claims), and the per-occurrence limit remains $300,000 — not $150,000.
Memory Technique
Think of aggregate as a shared bucket of water. Every claim drains from the bucket. Per-occurrence is the size of the cup you dip each time — the cup size never changes, but eventually the bucket runs low. Here: bucket = $150,000 left; cup = still $300,000.
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