What does excess loss insurance help manage?

Excess loss insurance is specifically designed to help manage losses that exceed a certain threshold. This type of coverage becomes effective after the insured party has incurred costs that surpass a predetermined limit. Essentially, it provides financial protection against significant or catastrophic losses that could pose a serious burden on the insurer or the insured. By having excess loss insurance, organizations or individuals can mitigate the risk associated with large, unexpected claims, ensuring that they are not overly exposed to substantial financial risks.

In contrast, the other options do not align with the primary purpose of excess loss insurance. For example, small claims under a specific amount typically would not require excess loss coverage, as this insurance is aimed at high-cost scenarios. Additionally, while minimal financial exposure pertains to overall risk management, it does not specifically relate to the function of excess loss insurance. General liability exposures cover a different area of risk than excess loss insurance, which is more focused on high-level losses rather than general liability matters.