Why Your $2 Million GL Policy Might Not Cover a $2 Million Claim

Most contractors know they have a two million dollar general liability policy. It's the number they quote when a GC asks about their coverage. It's the number on the certificate of insurance.

What most contractors don't know is that two million dollars doesn't mean what they think it means — especially when they're running more than one job at a time.

The Two Numbers Every GL Policy Has

Every general liability policy carries two primary limits that govern how claims get paid.

The per-occurrence limit is the maximum amount your carrier will pay for any single claim. On a standard GL policy, this is typically one million dollars.

The aggregate limit is the maximum amount your carrier will pay across all claims in the entire policy year. On a standard GL policy, this is typically two million dollars.

When contractors say they have a two million dollar policy, they're usually quoting the aggregate. But the aggregate isn't a per-job limit. It's a shared pool that applies to every claim, on every job, for the entire year.

How the Aggregate Erodes

A contractor is running three jobs simultaneously. On the first job, a significant incident results in an eight hundred thousand dollar claim. The carrier pays it. The aggregate pool now has one point two million remaining.

A few months later, a nine hundred thousand dollar claim comes in from the second job. The carrier pays it. The aggregate pool now has three hundred thousand remaining.

Near the end of the policy year, a six hundred thousand dollar claim is filed from the third job. The carrier pays three hundred thousand — what's left in the pool. The contractor is responsible for the remaining three hundred thousand dollars out of pocket.

The policy isn't expired. The coverage didn't fail. The carrier did exactly what the policy said. The aggregate was simply exhausted before the year ended.

The Products-Completed Operations Aggregate

Most GL policies carry a second aggregate specifically for products-completed operations claims — claims that arise after the work is finished. A roof that leaks eighteen months after installation. A floor that fails after the building opens.

This aggregate is separate from the general aggregate, but it erodes the same way. Contractors who have both active jobs and recently completed projects are drawing from two pools simultaneously. Most are not aware both pools exist.

The Per-Project Aggregate Endorsement

Standard GL coverage pools the aggregate across all jobs for the entire policy year. There is an endorsement called a per-project aggregate that changes this.

With a per-project aggregate endorsement, each individual job receives its own aggregate limit. If one project's claims exhaust its aggregate, the other active projects still have their full limits available.

This endorsement is not standard. It typically costs more. Whether it makes sense depends on the number of simultaneous jobs and their size. Most contractors have never been told to ask about it.

Three Numbers to Check on Your Declarations Page

Pull your declarations page — the summary document at the front of your GL policy. Find three numbers.

First: your per-occurrence limit. Maximum for any single claim.

Second: your general aggregate. The shared pool for all claims in the policy year.

Third: your products-completed operations aggregate. Separate pool for claims arising from finished work.

Those three numbers tell you what you actually have — not what you think you have.

Then ask your agent one question: given the number of jobs I'm running and their size, is my current aggregate exposure something I should be concerned about?

If you want help reading your declarations page or understanding whether your current limits make sense for your workload — that's the kind of conversation we have. Reach out.

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