California Self-Insurance Plans (SIP) Practice Exam

Which term describes coverage that provides protection after a cumulative loss limit is reached?

Specific excess insurance. Aggregate excess insurance. Primary insurance. Reinsurance.

Correct Answer:

Aggregate excess insurance.

Explanation:

Aggregate excess insurance describes coverage that kicks in once the total losses for the policy period have reached a specified cumulative (aggregate) limit. It protects against further losses beyond that threshold, up to the excess policy’s own limit. This is different from specific excess coverage, which responds only when a single claim exceeds a per-claim amount. Primary insurance is the initial layer of coverage, and reinsurance is insurance purchased by insurers themselves. So after the cumulative losses hit the set aggregate limit, the aggregate excess policy provides protection for losses beyond that point up to its limit.

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