What does the "excess of loss" clause refer to in a Crop/Hail policy?

The "excess of loss" clause in a Crop/Hail policy refers to the situation where the insured is responsible for a certain percentage of their loss before the insurance coverage kicks in. This means that after the insured experiences a loss, they will receive compensation only for the amount that exceeds the specified percentage of the value insured. This percentage serves as a deductible, indicating that the policyholder will have to absorb a part of the loss before the insurance company starts to pay for any damages.

Understanding this concept is crucial for policyholders because it affects how much they might receive in the event of a claim. It helps determine the financial responsibility they retain in managing risk associated with their crops. In contrast to other options, the "excess of loss" clause specifically entails a percentage-based deductible rather than a fixed dollar amount, complete waiver of deductibles, or limitations on coverage after a claim. Each of those alternatives describes different aspects of policy structuring that do not align with how the "excess of loss" clause functions.