An attachment point is the amount of money a primary coverage or individual must pay before supplemental insurance, or reinsurance, kicks in. This is meant to help spread liability, and ensure that one policy does not involve catastrophic losses that would be capable of hurting the financial condition of the policyholder or company. The point of attachment will be different depending on the policy and the terms agreed to in that policy. Attachment points may be in place for many different types of insurance, including health insurance, homeowner's insurance, and automobile insurance.
Often, for the individual policyholder, the attachment point is an issue that is largely in the background. For the vast majority of insurance policies, claims and benefits will be handled the same. Therefore, many individuals holding insurance policies may never be aware of this point or amount. If they are, it likely makes no difference to them from a practical matter, other than perhaps having to sign or initial one more form, or spot on the form, for the insurance company.
For other policyholders, the attachment point might make a difference. If a person is self-insured, for example, he or she may have to start sending in claims to a different company once that point has been reached. These claims should come with proof that the loss has reached the point where the other insurance will start paying the bills. Some terms and conditions might also be different with the new insurance product.
In some cases, an attachment point may apply to a particular claim or situation, but more often, it applies to an entire year's worth of activity. While one specific claim may not be enough to reach the threshold meant for other insurance to activate, it can be added to the total claims for the year. In that way, the loss before the point of attachment acts somewhat like a deductible.
Given that similarity between an attachment point and a deductible, other similarities exist as well. The lower the threshold, the more expensive the supplemental insurance policy will be. A low threshold increases the risk of more claims or more expensive claims. The tradeoff is that a higher point increases the risk for the primary insurance company or the individual.
It is up to the individual policyholder to understand when the attachment point kicks in, and what, if anything, needs done differently. Otherwise, the policyholder runs the risk of having a denied claim. Therefore, it is important for those buying insurance to ask an agent, or their employer, what the policy is.
