Pushing Limits to the Limit

A brief insight into limits and deductibles

By Chris Reilly, Associate Account Executive

Insurance claims can be costly for everyone involved. Making sure that you and your client understand a policy’s coverage, limits, and deductibles is the best way to make sure everyone is prepared for the possibility of a loss.

There are two common types of limits and deductibles; “per occurrence” and “per claim”. “per occurrence” indicates that the deductible or limit will respond to each overall situation, rather than each individual claim that may arise from the situation. For example, a gas explosion causes extreme damage to the interior of an apartment building, resulting in numerous claims from different tenants. “per occurrence” limits would respond the same, regardless of the claims arising from the incident. If your “per occurrence” limits sit at $2 Million, those limits will only pay $2 Million.

In the opposite respect to the above example, a “per claim” limit would pay for each claim, subject to the aggregate. If the same apartment building owner had $2 million in “per claim” limits rather than “per occurrence” his policy may have provided much more financial coverage.

In some cases, limits can also be applied to a specific project within the policy. Project specific limit endorsements allow for a certain limit amount to be assigned to a project or job for the policy holder. This is a great option for an insured who needs a practice policy for their normal operations, but a specific limit request for one of their jobs when their usual aggregate would not suffice.

In the same way that limits are impacted by “per claim” or “per occurrence”, deductibles can have these same options. In the above example, with the “per claim” deductible the insured may be responsible for a certain amount per claim that is paid by the carrier, while a “per occurrence” deductible would only require one deductible payment, regardless of the number of claims. Certain types of policies and coverages can also result in different types of deductibles. For instance, some hotel Site Pollution policies will have a “per room deductible” meaning that each room will have a certain deductible that the insured will be responsible for paying.

It’s important to make sure you and your insured understand the limits and deductibles on all policies to be prepared when and if a claim does occur. A thorough understanding of your coverages, limits, and deductibles can give a much clearer picture of which exposures still have a significant risk present.

Beacon Hill can offer a variety of coverages that can be optimized to suit the specific needs of your insured. We’ll work with you and your insured to find the best environmental insurance options, as well as the necessary limits and deductibles.