Other Than Life (OTL) Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Excess coverage is particularly beneficial in situations where the limits of a primary policy have been reached during a claim. In such cases, an excess liability policy provides additional coverage that kicks in once the primary coverage limits are exhausted. This can be crucial in preventing out-of-pocket expenses that could arise from a significant loss or liability claim, ensuring that the insured is adequately protected against large financial exposures.

The main purpose of excess coverage is to safeguard against severe incidents, such as catastrophic accidents or significant property damage, where damages may be extensive and could exceed the limits of a primary insurance policy. Therefore, having that extra layer of protection allows policyholders to handle larger claims without financial strain.

The other options do not accurately depict the primary function or advantage of excess coverage; for instance, newly constructed homes may or may not need excess coverage depending on their value and the limits of their primary policy. Additionally, while cost reduction and lower rates for personal items can be considerations in an insurance context, they do not directly relate to the specific advantage provided by excess coverage in handling larger claims.