Which of the following is considered a characteristic of primary insurance?

Primary insurance is characterized by its role as the first layer of coverage in the insurance hierarchy. It is the initial source of funds to pay claims and provides coverage up to the limits specified in the policy. When a loss occurs, the primary insurer is responsible for payment before any excess or secondary insurance policies come into play. This fundamental characteristic distinguishes primary insurance from other types of coverage, such as excess or surplus lines insurance, which typically act as additional layers that kick in after the primary coverage has been exhausted.

The notion of it needing to be directly purchased from the company, or its limitations to short-term liabilities, does not inherently define primary insurance. Furthermore, primary insurance can indeed include excess insurance provisions, which are arrangements for additional coverage beyond the limits of the primary policy. Therefore, identifying its role as the first layer of coverage is essential when discussing the characteristics of primary insurance.