Definition - What does Stop-Loss Insurance mean?
Stop-loss insurance refers to an insurance that aims to protect an employer from losing income because of medical claims by the employees. It is able to do that by letting the insurance cover for the medical expenses of the employees after the employer spends a specific amount on them. There are two types of stop-loss policies: individual and aggregate.
Insuranceopedia explains Stop-Loss Insurance
If an employer does not want to buy a group health insurance for his or her employees, then a stop-loss is an option that will save him or her from financial loss (or even ruin) owing to money that will be spent on employees' health issues.
This can be done by setting aside a portion of the employer's income for health care of the employees and getting a stop-loss policy. The employer and the insurance company agree on the fixed amount as a deductible. In the event of an employee asking for a medical claim, the insurance company pays for the amount that exceeds the deductible.
An individual stop-loss policy covers an employee's medical claim in excess of the agreed financial limit. An aggregate stop-loss policy covers all of the employees' medical claims that go over the deductible or financial limit.