AGGREGATE INDEMNITY Meaning and
Definition
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Aggregate indemnity refers to a type of insurance policy provision or contractual agreement where the maximum amount of indemnity (compensation or payment) is limited to a specific sum over a specified period of time. It is commonly used in liability insurance policies to cap the total amount of covered losses or damages sustained by the insured party within a given time frame, typically one policy period.
The concept of aggregate indemnity is designed to protect the insurer by limiting their liability exposure to a predetermined total amount, rather than having to pay out for an unlimited number of individual claims. This provision ensures that the insurer's financial risk is controlled and manageable. In the case where the total value of claims made against the policy exceeds the specified aggregate limit, no further indemnification will be provided, and the insured party will be responsible for any additional costs.
For example, if a liability insurance policy has an aggregate indemnity limit of $1 million for one year, any claims made during that policy year will be covered up to a total of $1 million. If the cumulative claims surpass this total, the insured party will be liable for the excess amount. This provision protects the insurer from excessive payouts and encourages responsible risk management by the insured.
It is important for policyholders to carefully review and understand the terms and conditions of the policy's aggregate indemnity provision to ensure they are aware of the maximum amount of coverage they have and any potential financial risk they may face.
Etymology of AGGREGATE INDEMNITY
The term "aggregate indemnity" does not have a specific etymology as it is a combination of two words with their own respective origins:
1. Aggregate: The word "aggregate" comes from the Latin word "aggregātus", which is the past participle of "aggregāre", meaning "to add to", "to gather". In English, it refers to a collection or accumulation of things combined into a whole.
2. Indemnity: The word "indemnity" originates from the Latin word "indemnitas", derived from "indemnis", meaning "unhurt" or "uninjured". It refers to a financial protection or compensation given to someone in case of a loss or damage.
