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Stop-Loss provides protection against catastrophic or unpredictable losses. Stop-Loss is purchased by employers who self-fund their employee benefit plans such as medical or workman's comp. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits. The stop-loss market protects and insures against not only catastrophic, but any losses above the determined limit.
Specific Stop-Loss is the form of excess risk coverage that provides protection for the employer against a high claim on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total. Specific stop-loss is also known as individual stop-loss.
Aggregate Stop-Loss provides a ceiling on the dollar amount of eligible expenses that an employer would pay, in total, during a contract period. The carrier reimburses the employer after the end of the contract period for aggregate claims.
While the largest employers have sufficient financial reserves to cover virtually any amount of health care costs, most self-insured employers purchase stop-loss insurance to reimburse them for claims above a specified level.
Stop-Loss protection can and should be provided through individual Captive Insurance companies.