Aggregate Annual Deductible
What Does Aggregate Annual Deductible Mean?
An aggregate annual deductible is the total amount policyholders must pay out of pocket during a policy period before the insurer begins covering eligible losses. In other words, whether the policyholder files multiple claims or a single large claim, they are responsible for paying up to a specified dollar amount. Once this threshold is met, the insurer starts covering the remaining costs.
Insuranceopedia Explains Aggregate Annual Deductible
As a general rule, the higher a policyholder’s deductible, the lower their premium costs. An aggregate annual deductible sets a cap on the total amount the policyholder must pay out of pocket for claims during the policy period, eliminating the need to pay a deductible for each claim. This can be particularly beneficial in cases like product liability.
For example, if a company selling dried food products faces 100 consumer claims valued at $3,000 each after making several buyers sick, they would owe $300,000 in damages following a lawsuit. With a $1 million liability insurance policy and an aggregate deductible of $50,000, the company would only need to pay $50,000, and the insurer would cover the remaining $250,000.
