What are occurrence and aggregate limits in a policy?
An occurrence limit is the maximum paid per incident, while an aggregate limit is the maximum your policy pays for all claims combined in a policy year. Choosing the right limits protects your business from multiple claims.
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Complete Guide to Occurrence & Aggregate Limits in General Liability Insurance
Why This Question Matters for Colorado and Utah Residents
Having the right general liability insurance can mean the difference between staying in business and facing a devastating financial setback. Occurrence and aggregate limits directly determine how much coverage your policy provides for a single claim—and across the entire year. Understanding these limits is critical in Colorado and Utah because:
- Local regulations often require minimum limits: For example, Larimer County (CO) sets a $1 million per occurrence/$2 million aggregate standard for many contractors. Utah businesses with contracts may find similar benchmarks.
- Regional claim trends drive real risk: Northern Colorado and Utah see high rates of premises liability (slip/fall, property damage) and severe weather-triggered incidents, meaning business owners can face multiple claims in a year.
- Industry-specific exposures shape your needs: Agribusiness, construction, and retail all face unique risks—average annual GL premiums in CO range from $500 (low-risk) to $3,283 (general contractors), reflecting claim frequency and potential limits needed.
What Most People Get Wrong
Many business owners confuse occurrence and aggregate limits or think the lower limit covers everything. A common misconception is that because a $1 million occurrence limit seems large, it's always enough—without realizing that a single policy year can include multiple claims, or that some contracts require higher aggregate coverage.
Others may not realize that once their aggregate limit is reached—whether from one major or several smaller claims—coverage for additional claims ends until renewal, leaving the business responsible for new incidents out-of-pocket.
The Complete Picture
Occurrence limit is the maximum the insurer will pay for any one incident, regardless of how many people are injured or how much property is damaged in a single event. Aggregate limit is the total amount the policy will pay out for all covered claims combined in the policy year.
For example, with a $1,000,000 occurrence and $2,000,000 aggregate limit, your policy will pay up to $1M for any one claim, but never more than $2M total—even if you have multiple incidents. Once the aggregate is reached, any additional claims that year are not covered. This matters regionally because businesses in high-growth or high-traffic areas (like Fort Collins or Salt Lake City) can experience multiple liability claims annually. According to recent Colorado stats, 74% of businesses facing claims over $100,000 without proper insurance close within two years. Choosing adequate limits protects your long-term business legacy, not just your current operations.
Making the Right Decision for Colorado and Utah Residents
Question 1: Do my policy limits meet local regulations and contract requirements?
Many Colorado counties—like Larimer—require a standard $1M/$2M limit for licenses and contracts. Utah businesses working with larger clients may face similar demands. Check your contracts and municipal codes:
- Are you required to carry a minimum occurrence or aggregate limit for your type of work or location?
- Do your customers/landlords demand to be listed as additional insured on your policy?
Question 2: Have I considered my actual risk for multiple claims?
It's not just large claims that matter—multiple moderate claims (like slip-and-falls or minor property damage) add up fast:
- Review your claim history: Has your business ever had two or more claims in one year?
- Do you operate in a high-traffic or high-liability industry (like food service, construction, or retail)?
Question 3: Am I planning for growth or unexpected surges in liability exposure?
With Colorado and Utah's rapid population and business growth, your liability needs can change quickly:
- Are you expanding to new locations or adding new services/products?
- Would a large claim or series of claims threaten your business continuity before the policy renews?
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Real World Examples
Fort Collins Bakery: Slippery Lessons on Coverage
Background: Claire owns Claire's Crusts, a bakery on Harmony Road, where customer foot traffic is steady, especially during snowy Colorado mornings. Her general liability policy has a $1M occurrence/$2M aggregate limit.
Coverage: $1,000,000 per incident (occurrence), $2,000,000 annual total (aggregate). Monthly premium: $115/month ($1,380/year).
The Incident: In February, two separate customers slipped on melted snow tracked inside, both needing medical care and legal settlements.
Total Claim Cost: $750,000 ($450,000 for the first slip/fall, $300,000 for the second within the same year).
Claire's Cost: $1,000 deductible per claim, all other costs covered under policy limits. Both claims together totaled $750,000—well within the $2M aggregate for the year.
"My bakery is back on its feet thanks to my policy's limits—without them, I'd owe hundreds of thousands!"
Denver Contractor: Multiple Claims, One Policy Year
Background: Mike runs Mile High Remodels on Colfax Avenue, Denver. He carries a $1M/$2M general liability policy, paying $274/month ($3,288/year) due to construction risk.
Coverage: $1,000,000 occurrence/$2,000,000 aggregate.
The Incident: In one policy year, Mike faces three separate claims—a tool falls and injures a client ($825,000), water damage from a project leak ($700,000), and a minor property damage claim ($100,000).
Total Claim Cost: $1,625,000 paid by insurance for the first two claims that were under the occurrence and within the aggregate. For the third claim, only $175,000 remained under the aggregate limit, so Mike paid the remaining $25,000 out of pocket.
Mike's Cost: Three deductibles plus $25,000 in excess of his aggregate—highlighting why knowing your annual total limit matters.
"Without strong coverage, just one active year could've wiped me out. Next renewal, I'm raising my aggregate limit!"
Salt Lake City Retail Shop: Repeating Risks, Reliable Coverage
Background: Sarah owns Beehive Finds, a retail store in downtown Salt Lake City, heavily trafficked during local festivals. Her policy has a $500,000 occurrence/$1,000,000 aggregate limit, costing $105/month ($1,260/year).
The Incident: Routine summer brings two minor premises liability claims in six months (tripped guest and property damage by a delivery cart).
Total Claim Cost: $470,000 total ($260,000 and $210,000 for each event, both covered as under occurrence and aggregate limits).
Sarah's Cost: $1,000 deductible per claim. All claims paid within policy limits, meaning her annual aggregate kept her business safe through multiple issues.
"If I'd chosen a lower aggregate, the second claim would've been fully my responsibility. So relieved FoCoIns reviewed my policy!"
Avoid These Common Mistakes
Mistake #1: Assuming One Big Limit Is Enough for All Claims
What People Do: Choose a lower aggregate limit, thinking their occurrence limit covers any number of incidents each year.
Why It Seems Logical: The dollar amounts listed per occurrence feel large and sufficient for most scenarios.
The Real Cost: In Colorado, a business with two moderate claims ($600,000 each) would exceed a $1M aggregate. Any additional claims must be paid out of pocket, jeopardizing business survival.
Smart Alternative: Work with FoCoIns to assess your annual risk exposure and set both occurrence and aggregate limits in line with your realistic business activity and risk profile.
Mistake #2: Overlooking Contractual Limit Requirements
What People Do: Buy minimum standard limits without checking their contracts or local business regulations.
Why It Seems Logical: Minimum premiums are attractive, especially for new or cost-conscious businesses.
The Real Cost: Contractors in Larimer County who don't carry the statutory $1M/$2M minimum risk losing contracts, facing fines, or being in breach of agreements, costing far more than the premium difference.
Smart Alternative: Review every major contract with your FoCoIns advisor to make sure your occurrence and aggregate limits satisfy both legal and business requirements.
Mistake #3: Ignoring the Impact of Multiple Small Claims
What People Do: Focus only on large, catastrophic claim protection and ignore the possibility of several small-to-moderate claims draining the aggregate limit.
Why It Seems Logical: “That’ll never happen here,” or assuming lightning won’t strike twice in one year.
The Real Cost: Retail and food service businesses in busy urban corridors (like Denver or Salt Lake City) see frequent minor incidents. Once the aggregate is exhausted, even small claims become fully out-of-pocket exposures—threatening cash flow and stability.
Smart Alternative: Assess your business activity and claim history at renewal. FoCoIns helps you right-size both limits for peace of mind through busy (or unexpected) seasons.
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