When looking at insurance policies, it’s important to know whether you want to be looking for “in the aggregate” or “any one claim”. The amount of money that your insurer will pay out for a claim may differ greatly, depending. These three words are crucial.
Public liability insurance and employers’ liability insurance are treated as “any one claim”. So when insurance customers are confused between “in the aggregate” and “any one claim”, they are usually referring to professional indemnity insurance.
What does “in the aggregate” mean?
When an insurance policy is arranged on an aggregate basis, this means that the limit of indemnity is the total amount that the insurer will pay out over a policy term (usually one year) for multiple claims. All expenses are paid out of that limit and, once the limit of indemnity has been reached, then your insurance company will not indemnify any future claims for the remainder of the term. Basically, you run out of cover. Once it’s gone, it’s gone. That’s it.
This is unlikely to be an issue for most businesses, but larger businesses who anticipate or would just like protection from large claims will find reassurance that they won’t run out of cover when they need it.
What does “any one claim” mean?
When a policy is on an “any one claim” basis, then the insurance customer is entitled to the full limit of indemnity for each and every claim made. For this reason, “any one claim” is also frequently referred to as “per occurrence”, “per claim”, and “each and every claim”. Unlike with “in the aggregate” where the cost of each claim is deducted from the total limit available, with “any one claim” policies each claim is allocated 100% of the indemnity limit.
Example scenario: £1 million indemnity limit
Let’s say your insurance company covers you for up to £1,000,000 (£1m).
They will pay up to £1m if a valid claim is made against you.
For those with a policy in the aggregate, £1m is the maximum that your insurer will pay out for the year, regardless of how many claims are made. The “piggy bank” only has £1m in it, saved for rainy days when you need to cover the expenses for any damages or legal costs throughout the year. If you have a small amount left in the piggy bank after a seemingly “rainy year”, but not enough to cover the full amount of a new claim, then the insurer will pay part of your claim but you will have to be pay the outstanding amount from your own pocket. If the piggy bank becomes empty, then you will have to meet the costs of any future claims yourself for the remainder of the policy term.
However, if your policy is any one claim, then that £1m indemnity limit is per claim.
In our example, we’ll pretend that you’ve had a total nightmare of a year with three claims made against you costing half a million pounds each.
With a policy in the aggregate, this amount accumulates and you will end up having to pay the shortfall of £500,000 yourself.
With any one claim, you won’t have to worry. Your level of cover exceeds each of the claims’ costs. You won’t be left unprotected so long as any one claim does not exceed the £1m limit.
Of course, any one claim basis is the ideal. You won’t have to worry about your business potentially going under if you have a particularly bad year in which you face multiple claims. The premium may be a little pricier, as you would expect, but only by a very small amount. It’s certainly the safer option when it comes to claim settlements!
However, depending on your type of business, an aggregate policy may be all you need. Low-risk small businesses are very unlikely to ever “run out” of coverage with an aggregate policy. But some still may find comfort in knowing that they have that level of protection should they ever need it.
If you require help with understanding your professional indemnity insurance policy, or would like to speak to someone about arranging a policy tailored to your specific business requirements, please do not hesitate to call us on our freephone.
Call 0800 169137