The financial cushion an insurance company sets in reserve that’s available to pay customer claims. The surplus is also a measure of its financial strength and sustainability once liabilities are subtracted from assets.
If you file an insurance claim with your carrier for an unexpectedly high amount, the surplus provides a way for your insurer to reimburse you for the damage or loss you’ve suffered, as long as it’s covered under the provisions of your insurance policy.
For example, if a spring storm pelts your home and high winds and hail cause $150,000 in damage-but you’ve paid less than that in premiums-the surplus held by the insurance company will make up the difference. This money can be invaluable at a time of great loss.