The limit of liability coverage refers to the maximum amount an insurance company will pay out for a covered claim under a liability insurance policy. This limit is typically defined in two ways: per occurrence and aggregate. The “per occurrence” limit is the maximum payout for a single incident, while the “aggregate” limit is the total amount the insurer will pay for all claims within a policy period, usually a year. For example, a policy might have a per-occurrence limit of $500,000 and an aggregate limit of $1 million. Once these limits are reached, the policyholder is responsible for any additional costs. The limit of liability is critical because it dictates how much protection an insured individual or business has in the event of a claim, and higher limits typically come with higher premiums but provide greater financial protection.