Which statement best describes primary vs excess layering?

Which statement best describes primary vs excess layering?

• A. Excess coverage negates primary.
• B. They both pay in parallel, proportional.
• C. Excess pays before primary.
• D. Primary pays first until its limit, then excess pays.

Answer: (D)

In layering, the primary policy handles losses up to its limit, and any amount above that is covered by the excess policy. The excess policy doesn’t start paying until the primary’s limit has been reached, and it can only pay up to its own limit. This setup keeps the primary responsible for initial losses and uses the excess to cover higher-severity claims. For example, with a primary limit of 1 million and an excess that begins above 1 million, a 1.2 million loss would see the primary pay 1 million and the excess pay 200,000 (up to its own limit). If the loss is only 900,000, the excess wouldn’t pay at all. Therefore, the statement that best describes primary vs excess layering is that the primary pays first until its limit, then excess pays.

In layering, the primary policy handles losses up to its limit, and any amount above that is covered by the excess policy. The excess policy doesn’t start paying until the primary’s limit has been reached, and it can only pay up to its own limit. This setup keeps the primary responsible for initial losses and uses the excess to cover higher-severity claims. For example, with a primary limit of 1 million and an excess that begins above 1 million, a 1.2 million loss would see the primary pay 1 million and the excess pay 200,000 (up to its own limit). If the loss is only 900,000, the excess wouldn’t pay at all. Therefore, the statement that best describes primary vs excess layering is that the primary pays first until its limit, then excess pays.