Definition

A refund given to policyholders when the insurer performs better than expected. It rewards you for keeping a low number of claims.

What to consider

  • Determine the appropriate level of risk to retain.
  • Ensure you have funds available to cover retained losses.
  • Review the potential impact on overall risk exposure.

Real world scenarios

  • A company chose to retain a portion of risk by not purchasing full coverage for minor losses.
  • An entrepreneur decided to self-insure smaller claims to reduce premium costs.
  • A business set a risk retention level, agreeing to pay the first $5,000 of any claim.

Related terms

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