What does the term "split point" refer to?

The term "split point" specifically refers to the boundary that distinguishes between primary and excess losses in the context of insurance coverage and risk management. In situations where insurance is structured with multiple layers, the primary layer covers losses up to a certain limit, known as the split point. Any losses that exceed this limit are then covered by the excess layer of the insurance policy. This concept is crucial for understanding how different layers of insurance interact and how losses are allocated between them.

Understanding the split point helps insurers and policyholders plan for risk and ensure that appropriate coverage is in place for various scenarios. The delineation offered by the split point is vital for businesses evaluating their insurance needs and for insurance professionals when structuring policies to fit those needs accurately.