What does the term "buffer layer" refer to in insurance layering options?

The term "buffer layer" refers to an additional layer of coverage specifically designed to fill gaps in protection between existing layers of insurance. This concept is particularly important in layered insurance programs, where multiple policies may be used to address different levels of risk. A buffer layer ensures that there are no significant uninsured exposures that could occur between the primary layer of coverage and any excess or umbrella layer that follows.

In the context of insurance, having a buffer layer can provide additional security by covering claims that fall within a certain range, which might otherwise go unaddressed due to policy limits or exclusions in the underlying coverage. This is crucial for businesses that want to safeguard themselves from potential financial loss that exceeds primary policy limits but does not reach the excess or umbrella coverage thresholds.

The other choices do not accurately capture the defining characteristics of a buffer layer. A policy covering only minor claims does not address the concept of risk layering. A separate policy applying after a claim exceeds a certain amount pertains more closely to excess insurance rather than a buffer layer, and a type of exclusion in regular policies does not relate to the idea of layered coverage at all.