What does the term "excess" refer to in the context of insurance policies?

In the context of insurance policies, the term "excess" refers to coverage that pays second or above. This means that an excess policy provides additional coverage on top of the primary insurance, thereby offering supplemental financial protection after the limits of the primary policy have been reached. For instance, if a primary policy covers losses up to a specified limit, any claims that exceed that limit may be covered by an excess policy, ensuring that the insured has additional resources available in the event of larger claims.

This concept is particularly relevant for clients who want to enhance their coverage or who are exposed to higher risks that might exceed their base policy limits. By purchasing an excess policy, policyholders effectively secure a broader safety net against significant losses or liabilities.

The other options do not align with the specific definition of "excess" in the insurance context. For instance, the mention of the first source of coverage pertains more closely to primary insurance, while pro-rata payments usually relate to the allocation of claims among multiple insurers. The necessity for additional premiums connects to the general concept of cost in insurance rather than the specific function of excess coverage.