In the context of excess coverage, after what threshold does excess insurance provide coverage?

• A. From the start of the policy
• B. After the entire policy limit
• C. After the self-insured retention or underlying policy layer
• D. Only after a claim is filed

Answer: (C)

Excess coverage kicks in after the first, underlying layer has absorbed its share. In other words, the excess policy starts paying only once the self-insured retention (the amount you must pay yourself) or the underlying policy layer has been exhausted or satisfied. After that threshold is met, the excess coverage pays amounts above it up to its own limit.

For example, if you have a self-insured retention of 100,000 and an underlying policy that can pay up to 400,000, a loss of 1,000,000 would require you to pay 100,000 (SIR), the underlying policy to pay up to 400,000, and the excess policy to cover the remaining 500,000 (assuming its limit is at least 500,000).