What does excess coverage provide?

Excess coverage is designed to provide insurance for losses that exceed a specified attachment point, which is the threshold amount that must be reached before the excess coverage kicks in. This type of insurance is typically used as a way to protect against catastrophic losses by covering higher amounts after primary insurance has been exhausted.

For example, if a business has a primary insurance policy with a limit of $1 million and an excess policy with a $2 million limit, the excess coverage will apply only after the primary insurance pays out its limit of $1 million. This makes excess coverage particularly useful for entities that face significant potential liabilities, allowing them to have a safety net beyond their primary policy limits.

The other answer choices do not accurately describe the nature of excess coverage. Insurance at a reduced rate for high-risk areas pertains more to underwriting considerations rather than the structure of coverage. Comprehensive coverage below the primary level implies an additional layer of coverage that contradicts the basic function of excess coverage. A flat rate insurance policy that covers all risks does not align with the specific purpose of excess coverage, which is focused on high-limit losses beyond an attachment point.