What is the primary purpose of excess insurance?

The primary purpose of excess insurance is to cover losses that exceed a specified amount, which is especially relevant for self-insured employers. Excess insurance serves as a safeguard against catastrophic losses by providing additional coverage beyond the limits of a primary insurance policy. This type of insurance is crucial for businesses that retain a significant portion of their risk through self-insurance and want to protect themselves from the financial impact of losses that surpass those self-insured retention levels.

Businesses often opt for excessive coverage when they anticipate potential high-cost claims, ensuring they have the necessary financial support to manage such unexpected expenses. This coverage plays an essential role in risk management strategies, allowing organizations to take on higher levels of risk while maintaining a safety net against severe losses that they might not be prepared to handle on their own.

The other options do not accurately reflect the primary purpose of excess insurance, as they address different aspects of insurance coverage that are not central to the function of excess policies.