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Definition: Aggregate Stop-Loss Insurance
Aggregate stop – loss insurance is a type of insurance against catastrophic or unpredictable losses. Employers, who decide to self-fund their benefit plans but do not want 100% liability of their losses, invest in aggregate stop-loss insurance. This insurance protects employers from higher than expected claims. Thus if the claim exceeds the aggregate limit, called the deductible, the insurance carrier company reimburses the excess losses.
For example: If the total amount of claim is 130% of the face amount of the policy, this insurance will reimburse the additional 30% of the total cost.
Special feature for this type of insurance is that it insures only the employer and not the employee.
Also the expenses determined to be eligible for reimbursement are based on two criteria:
• The loss must be a part of loss definition under the stop-loss policy
• The expenses must be eligible under employer benefit plan as approved
The Stop – coverage is usually written by a trust. The trustee being the policyholder and the employer claiming the stop-loss insurance is the participating employer of the trust. Each employer receives a participating certificate which defines the benefits provided by the policy issued under the trustee.