Term Of The Day – Annual Aggregate Deductible
A collective type of deductible that can be used as a great risk management tool. The annual aggregate deductible (AAD) enables an insured to protect itself from numerous small claims by limiting the amount of deductible they pay per policy year. A policy would start to pay benefits once the agreed aggregate amount is reached.
As an example – a company had 30 Workers Comp claims where they agreed to pay the first $500 of each claim as a deductible with an AAD of $10,000. The insured would have had to normally pay $15,000 as a deductible. However, with the AAD, they saved $5,000 for the policy year.
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