Insurance Policy Retention Definition
An insurance retention is similar to a deductible and the two words are often used interchangeably.
Insurance policy retention definition. Business net retention represents an insurance company. A self insured retention sir is a portion of each insurance claim that is not insured by the policy and requires the insured to pay before insurance becomes effective. Technically you pay a retention upfront and reimburse your insurance company for the deductible after they pay the claim you can reduce your insurance premium by increasing your retention amount. So now comes the fun reporting part.
The specific umbrella policy will dictate exactly how much money the policyholder will have to spend on the deductible. 2 in reinsurance the net amount of risk the ceding company keeps for its own account. Companies often retain risks when they believe that the cost of doing so is less then the cost of fully or partially insuring against it. The amount they ask you to retain depends on who you are and what insurance you re buying.
For example if a person agrees to a self insured retention clause of 2 000 in a property insurance policy the person must pay out at least 2 000 in costs related to the property damage. Policy retention always the lowest. A professional liability policy for a hedge fund is considered high risk so the retention may be as high as 250 000. The insurance company begins making payments up to the policy limit only after the policyholder pays the 2 000 self insured retention.
A retention deductible is a clause in an umbrella insurance policy which declares that the deductible will apply for losses for which there is no underlying policy that provide coverage for the specific loss. Risk retention is a company s decision to take responsibility for a particular risk it faces as opposed to transferring the risk over to an insurance company. There are two retention rates you need three if you love numbers and are running commissions on your management system. A startup s fiduciary liability policy is considered low risk so there may only be a 1 000 or even 0 retention for each claim.
Revenue retention if you are tracking commissions in your management system. Retention can be intentional or when exposures are not identified unintentional.
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