Meaning
Financial thresholds within a liability policy mark the specific dollar amount of loss that an insured party must bear before an excess coverage provider begins to pay. An insurance attachment point functions as the boundary between different layers of a risk management program. It determines the point where the primary policy is exhausted and the secondary or umbrella policy becomes active.
Risk Retention
Risk levels retained by the company are represented by the amount below the insurance attachment point. For a large corporation, this might be a multi-million dollar deductible that the firm pays from its own balance sheet. Setting the insurance attachment point higher reduces the premium but increases the potential cash outflow during a claim event.
Indemnity Trigger
Triggering the next layer of coverage requires proof that the underlying limits have been reached through actual loss payments. In professional liability or directors and officers insurance, the insurance attachment point is a primary figure during settlement talks. A plaintiff may aim for a settlement just below this point to avoid the more aggressive legal defense typically provided by excess insurers.
This threshold determines which insurance company lawyer sits at the head of the table. The secondary insurer only monitors the case until the loss nears the trigger. It provides a clear signal for the transition of legal control.
Liability Layer
Layers of insurance are stacked to provide high limits of protection. The insurance attachment point for the third layer is the sum of the primary and secondary limits.
