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The purchase of Stop-Loss insurance protects your self-funded plan against the financial consequences of large individual claims or an unusually high number of claims for the entire group. This coverage protects against losses that exceed the predetermined or pre-funded level designed into the program. If losses do exceed these levels, the Stop-Loss insurer steps in to absorb the excess costs.
The most appropriate use of insurance:
PROTECTION AGAINST CATASTROPIC LOSS.
Stop-Loss insurance is most frequently purchased in two forms - Specific and Aggregate.
Specific Stop-Loss will apply to limit losses for any one individual. Any specific losses above the Stop-Loss amount are reimbursed to protect the plan sponsor against unexpected and unusually large individual claims.
Aggregate Stop-Loss will effectively set the maximum limit of all claim loses in any given plan year. Claims in excess of the Stop-Loss amount are reimbursed to protect the plan sponsor against unexpected frequency or severity of claims for the entire group.
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