Stop Loss Insurance is a designated insurance policy which protects companies from a high claiming year.
In other words, a policy designed to limit claim coverage (losses) to a specific amount. This type of coverage is to ensure that large claims (specific stop-loss) or numerous claims (aggregate stop-loss), do not upset the financial reserves of a self-funded plan.
Aggregate stop-loss protects the employer against higher-than-expected claims. If total claims exceed the aggregate limit, the stop-loss insurance provider reimburses the employer. For example, where the claim fund is forecast at £500,000 and a Stop Loss policy bought at 125% of the claims’ fund, the liability for payment of claims would transfer to the insurer once the claims reached £625,000.