Definition:Per-claim limit

📋 Per-claim limit is the maximum amount an insurance carrier will pay for any single claim under a given policy. It functions as one of the key boundaries of coverage, sitting alongside the aggregate limit — which caps total payouts across all claims during the policy period — to define the insurer's financial commitment. Per-claim limits are especially prominent in liability lines such as professional liability, D&O, and E&O, where the cost of a single event can vary dramatically.

⚙️ When an insured reports a covered loss, the adjuster evaluates the total indemnity and defense costs attributable to that claim. If the combined amount exceeds the per-claim limit, the insurer's obligation stops at the stated ceiling and the insured bears the excess. In many claims-made policies, defense costs erode the per-claim limit — meaning legal fees reduce the dollars available for settlement or judgment — unless the policy specifies that defense costs sit outside the limit. How a policy defines and groups a "claim" also matters: related or interrelated wrongful acts may be treated as a single claim, collapsing multiple allegations under one limit rather than allowing each to draw its own.

💡 Selecting the right per-claim limit is a core part of the underwriting and risk management conversation. An insured with high-severity, low-frequency exposure — such as a hospital facing medical malpractice suits — may prioritize a robust per-claim limit over a higher aggregate. Brokers often layer excess or umbrella coverage above the per-claim limit of the primary policy to protect against catastrophic single-event losses. For carriers, setting this limit accurately reflects their appetite for individual-loss volatility and directly influences premium pricing and reinsurance cession strategies.

Related concepts:

• Definition:Aggregate limit
• Definition:Policy limit
• Definition:Defense costs
• Definition:Claims-made policy
• Definition:Self-insured retention (SIR)
• Definition:Excess insurance