The employer has an aggregate stop loss excess insurance policy. It is:

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Prepare for the California Self‑Insurance Plans (SIP) Exam with our interactive quiz. Benefit from multiple-choice questions, detailed explanations, and essential tips to enhance your knowledge and succeed in your exam!

Multiple Choice

The employer has an aggregate stop loss excess insurance policy. It is:

Explanation:
In California, a self-insured employer must provide a security deposit to guarantee future workers’ compensation payments. An aggregate stop loss excess policy is a legitimate way for an employer to transfer part of that risk to an insurer by covering total claims that exceed a specified annual deductible. Because this coverage reduces the employer’s net exposure, the Department of Industrial Relations can credit part of the stop‑loss coverage against the required security deposit, lowering the amount the employer must deposit. So the correct description is that the policy is legal and it reduces the security deposit.

In California, a self-insured employer must provide a security deposit to guarantee future workers’ compensation payments. An aggregate stop loss excess policy is a legitimate way for an employer to transfer part of that risk to an insurer by covering total claims that exceed a specified annual deductible. Because this coverage reduces the employer’s net exposure, the Department of Industrial Relations can credit part of the stop‑loss coverage against the required security deposit, lowering the amount the employer must deposit.

So the correct description is that the policy is legal and it reduces the security deposit.

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