Definition

The percentage of claims paid out compared to the premiums collected by an insurer. It helps measure the company’s performance and pricing accuracy.

What to consider

  • Review the attachment point and limits.
  • Understand how stop-loss affects overall risk.
  • Consider premiums versus potential benefits.

Real world scenarios

  • A small business with self-insured health plans purchases stop-loss coverage to limit potential catastrophic claims.
  • A group health plan uses stop-loss insurance to protect against unexpectedly high claims.
  • An employer adds stop-loss coverage to ensure that no single claim jeopardizes its finances.

Related terms

Insurance & Financial Protection