excess of loss

Excess of loss is an insurance arrangement where the insurer covers claims exceeding a specific amount, called the attachment point, up to a certain limit. This means the insurer only pays when the total claims surpass that threshold, helping manage large or unpredictable losses. For example, if a policy has an excess of loss clause with a $100,000 attachment point, the insurer covers costs only after claims exceed that amount, up to the agreed limit. This helps prevent the insurer from bearing all losses, sharing the risk and providing financial protection against severe events.