Stop-loss insurance is a product, which is sometimes used by self-insured employers to protect themselves against unexpectedly high claims. It is not typically part of an individual insurance plan.Many companies choose to minimize their expenses by self-insuring rather than purchasing costly group insurance plans (usually health insurance). For example, rather than participating in a group health insurance plan, a company might set aside a certain amount of money from which it would reimburse the medical expenses of its employees and their families. While this can be an excellent cost-saving measure, it also exposes the company to a great deal of risk. One critically ill employee could drain the company's medical insurance fund, leaving the company open to lawsuits from other employees whose medical claims cannot be paid as promised.Stop-loss insurance can prevent this nightmare from materializing. It typically works in one of two ways:Some policies protect the employer against unusually large claims by any one employee (or family member). This type of coverage kicks in once the employer has paid out a certain dollar amount—typically $10,000 or more. Stop-loss insurance then pays the remaining covered expenses of the employee, up to the maximum amount allowed under the stop-loss policy.Other policies protect the employer against an unexpectedly high number of claims. With this type of stop-loss policy, the insurance coverage takes over after the aggregate claims paid by the employer reach a certain level. Again, payments are made under the stop-loss policy up to the limits stated in the insurance contract.Stop-loss insurance is a very specialized product, and not all insurers offer it. If you are a self-insured business owner and you think stop-loss insurance might be appropriate, you may have to contact several insurers before you find one that offers stop-loss coverage.Obviously, the main advantage of stop-loss insurance is that it can keep a company from financial ruin. The flip side is that it is an added expense. You'll need to do some detailed analysis to determine whether the benefit justifies the cost. There is also great variation between stop-loss policies, so it is important to make sure you find a policy that meets your needs. In some cases, you may find it more cost-effective to abandon your self-insurance plan in favor of a group insurance plan. Or you may choose to self-insure but forego stop-loss insurance, especially if your employees and their families are relatively young and healthy.