It is therefore possible to use up insurance depending on policy limits, size of claims and number of claims during the year. The limits may vary from one type of policy to another because of a number of factors. The frequency and potential for large claims on a risk covered by one type of policy may be significantly greater than another type of policy. Therefore, MCO may carry a higher limit on riskier or more costly activities. Greater protection can also be added for certain risks by purchasing an additional policy that provides a higher layer of insurance and additional coverage over the limit of the first policy.
Most insurance policies have a deductible or an attachment point where they begin to pay.
The deductible is the dollar amount which MCO would have to first pay on a claim before the insurance company would begin its payment. If there is not a deductible, the policy is considered to be first dollar coverage. MCO's deductibles vary from policy to policy and some are high. The higher deductibles of some policies are MCO's preference because MCO has either elected to take on more of the first dollar risk through self-insuring or because the deductible of a large insurance policy is covered by a smaller policy. The coverage describes the various protections offered by the particular MCO insurance policy or self-insurance program under review.