What does "per occurrence" limit refer to?

The term "per occurrence" limit refers specifically to the maximum amount that an insurer will pay for each individual claim made under a policy. This means that if a covered event results in losses, the insurer is only obligated to pay up to the specified limit for that singular event, regardless of the total amount of losses that may arise from multiple events or claims in a policy period.

For instance, if a policy has a per occurrence limit of $1,000,000, and there is a claim for damages from a single incident, the insurer will cover the losses up to that limit. If the losses exceed this amount, the insured would be responsible for the difference. This ensures that the insurer's liability is clearly defined for each separate event, providing a straightforward framework for claim payouts. Understanding this concept is crucial for both insurers and policyholders as it impacts coverage limits and the financial planning related to potential claims.