Business insurance excesses and limits explained

Check whether an excess applies, how much it is and how the policy applies it to the claim.

For the relevant section, establish:

• Whether an excess applies to this type of claim.
• The amount or percentage, including any minimum.
• How often it applies: per claim, event or another defined unit.
• How it applies to legal costs and other covered expenses.

No excess (sometimes shown as nil) for one item does not mean there is no excess for every section.

An estimated loss below the excess does not automatically remove reporting duties. Check the policy’s claim and circumstance notification requirements before deciding not to report it.

How the contribution is paid or accounted for depends on the terms and claim type. It may be deducted from a settlement or collected separately; do not assume a universal payment sequence. If you are concerned about paying it, speak to the provider about your circumstances.

Compulsory and voluntary excesses

A compulsory excess is set by the insurer. Here, “compulsory” does not mean the insurance itself is required by law.

Some insurers let you choose an additional excess. Check which options are offered and whether it is added to the compulsory excess.

A simplified excess example

Assume a fictional £10,000 fully covered loss, a £500 applicable excess, and no other limits, costs, deductions or coverage issues.

£10,000 − £500 = £9,500

Under these assumptions, the insurer contributes £9,500 and the business contributes £500; the example does not establish every claim outcome or payment sequence. Do not use this subtraction as a general formula where cover limits and excesses interact.

Ordinary excess examples cannot be transferred automatically to compulsory employers’ liability insurance. Statutory protections and any arrangement for the employer to repay the insurer, sometimes called reimbursement, require separate specialist checking. The employee should not be treated as responsible for the employer’s contribution.

A cover limit states the maximum the insurer will pay under the relevant terms. Check:

1. Which cover and insured businesses or people share it.
2. Which claim, occurrence, event or related series it applies to.
3. Whether a total aggregate also applies.
4. How legal costs are treated.
5. Whether smaller limits or amendments change it.

“Per claim”, “per occurrence” and “per event” are not interchangeable. Their definitions determine which claims or incidents share an amount; read the wording rather than relying on the label.

The insurance limit does not itself cap your business’s legal liability. Amounts above the available insurance may remain your responsibility.

A limit is not a promise of payment for every loss. Other terms still apply; see the guide to policy exclusions for restrictions on what is covered.

Understanding a limit is separate from choosing an amount. Use the guides to public liability cover levels or professional indemnity cover levels for the selection questions.

A per-claim limit applies to each claim as defined by the policy. Documents may call this “each claim” or “any one claim”.

An aggregate limit is a total shared across the claims or losses specified in the policy. Check which sections and insured parties share it and the period it covers. That period is not automatically a calendar year or 12 months. A policy can have both per-claim and aggregate limits.

Limit basis	Main question	Additional check
Per claim	What limit applies to a defined claim?	Can related claims share it?
Occurrence or event	What limit applies to the defined incident?	How are multiple claims from it treated?
Aggregate	What total is shared over the specified period?	Which claims, costs or insured parties use it?
Per claim plus aggregate	What individual and total limits apply?	Could either restrict the amount available?

A simplified aggregate-limit example

Fictional illustration. Assume:

• Two independent, fully covered claims.
• A £100,000 annual aggregate for that section; annual is an example assumption, not a rule for all aggregates.
• No excess, defence costs, other limits, related-claim grouping or reinstatement, and sufficient cover otherwise.

Step	Covered amount assumed	Payment under these assumptions	Aggregate remaining
Start	Not applicable	Not applicable	£100,000
First claim	£60,000	£60,000	£40,000
Second independent claim	£60,000	At most £40,000 under these assumptions	£0

The second £60,000 cannot all fit within the £40,000 remaining aggregate. This illustration does not decide anyone’s legal liability for the balance.

How a per-claim limit differs

Now assume the same two independent, fully covered £60,000 claims, but a fictional £100,000 per-claim limit with no aggregate, grouping, excess, costs or other restriction.

Both £60,000 amounts fit individually under that limit. That comparison depends on the stated assumptions: it does not establish that per-claim insurance provides unlimited total protection or that every new claimant creates a fresh limit.

All figures on this page are fictional illustrations, not recommended limits, market norms or confirmed partner terms.

Where legal costs are included within the limit, they reduce the amount remaining for other covered payments. This is costs-inclusive wording.

Where costs are paid in addition, check which costs qualify, consent requirements, separate limits and other restrictions. “In addition” does not mean every legal bill is covered without limit.

For a separate fictional illustration, assume a £100,000 costs-inclusive limit and £20,000 of covered defence costs charged against it, with no excess or other deductions.

£100,000 − £20,000 = £80,000

Remaining limit: at most £80,000 for other covered amounts under these assumptions. This is not a claim payment.

Ask how your defence costs are treated. Separately, check any claimants’ legal costs you become liable to pay. Do not confuse either category with separate legal expenses insurance. Then ask how the excess applies to those costs compared with compensation.

A headline limit may be affected by narrower caps, grouping provisions and the amount already used. Read those details before comparing figures.

Sublimits within headline cover

A sublimit is a smaller limit for a particular type of claim or cost. Ask whether it sits within the main limit or is additional, whether it has its own aggregate and how legal costs are treated. Do not assume it adds cover on top of the main limit.

Related claims and grouping

Connected claims may share a limit or excess, depending on the policy definitions. Several complaints or claimants do not automatically create separate limits or excesses. Equally, events should not be grouped simply because they sound similar.

Identify the definition, relevant facts and applicable periods. Check the grouping basis for the limit and the excess separately; they need not match.

Grouping is different from the event and timing conditions that determine which policy period may apply. The claims-made and claims-occurring guide explains timing. Before changing cover, check earlier matters, reporting and continuity with the provider; see retroactive dates and run-off cover.

Reinstatement and remaining aggregate

If provided, reinstatement may restore some cover after it has been used. Ask what amount is restored, how often, for which claims and subject to what conditions and cost. Do not assume it is available, automatic or resets every restriction.

Ask the provider how claims or costs still being assessed affect the amount remaining. Do not assume every amount not yet paid is available for another claim.

Is an aggregate excess the same as an aggregate limit?

No. An aggregate limit sets a maximum the insurer will pay for specified cover and a period. An aggregate excess concerns your business’s contributions across specified claims or losses over a defined period.

Do not assume an aggregate excess is a maximum total out-of-pocket amount. Check:

• Whether individual excesses also apply.
• Which contributions and costs count towards it.
• Which period and sections it covers.
• What happens when the amount is reached.

Ask whether amounts must be incurred, agreed or actually paid before they count. These are different stages; the wording determines which applies.

Terminology note: Excess-layer or excess-of-loss insurance is a separate concept involving a layer of cover. It is not another name for the ordinary policyholder excess.

Where the insurer offers different excesses, compare actual quotes with matching cover and payment assumptions. Check whether the contribution is affordable, how often it may apply and whether other terms change. Availability and savings are not guaranteed.

A lower premium alone does not establish suitability. General advice about choosing a higher excess should not be applied to compulsory employers’ liability.

The business insurance cost guide explains broader pricing questions.

Use the applicable quote, schedule, full wording and endorsements for the product, version and section. Summaries and certificates are not complete substitutes. Follow definitions and cross-references. If terms conflict, ask the provider which documents apply and how the clauses work together.

Gather the following information and record the answers and document references.

Group	Check	What to record
Document details	Documents	Insurer, product, reference, version, section and dates.
Document details	Amendments	Endorsements changing these terms.
Limits and costs	Cover limit	Amount, cover and exact basis.
Limits and costs	Aggregate	Amount, period and what shares it.
Limits and costs	Sublimits	Category, amount and relationship to the main limit.
Limits and costs	Defence and claimants’ costs	Record each category separately: do costs count towards the limit or are they paid in addition? Note consent, separate limits and restrictions.
Limits and costs	Reinstatement	Whether provided, amount and conditions.
Contributions and grouping	Excess	Amount, percentage or minimum; claim type and basis.
Contributions and grouping	Aggregate contribution, if applicable	Amount, period, what counts and whether individual excesses also apply.
Contributions and grouping	Costs and excess	Whether covered costs count towards the excess and how the terms interact.
Contributions and grouping	Grouping	Related-claim definitions for the limit and excess separately.
Unresolved questions	Unclear terms	Clause reference, question and written clarification needed.

If a summary is silent, record “not stated; ask”, rather than assuming inclusion or exclusion. Save the written answer and note whether revised documents are still needed. Requesting a change does not confirm it.

You could ask:

For this quote and wording version, what limit and excess basis applies to [section]? How are related claims grouped for each? How are defence and claimants’ legal costs treated against the limit and excess? Please identify the relevant clauses and amendments.

Keep the checklist and answers with your policy documents. Use the provider’s appropriate channel for sensitive claim information.

For an existing claim, follow the claims contact and procedure in your policy documents; the claims guide helps you prepare.

Once the terms are clear, revisit the relevant cover-level guide to assess an amount. To compare different offers, use the business insurance quote-comparison guide.