Most organizations designate a financial threshold for which they will cover losses themselves, and in order to guarantee payment over this threshold, they might purchase

• A. An endorsement
• B. A self-insured retention (SIR)
• C. An assigned risk plan
• D. Excess insurance

Answer: (D)

When a company wants to control smaller losses itself, it can set a self-insured retention, which acts like a deductible the insured pays up to a specified amount. To ensure there’s coverage for larger, catastrophic losses that go beyond that self-insured amount, the organization purchases excess insurance. The excess policy kicks in once losses exceed the retention, providing coverage up to its own limit. This arrangement lets the company fund smaller claims in-house while transferring the big, potentially unpredictable losses to the insurer.

Endorsements simply modify or add terms to a policy; an assigned risk plan is for providing coverage to high-risk applicants who can’t obtain standard insurance; a self-insured retention is the threshold the insured funds up to, not the additional protection purchased to cover losses beyond it.