What does risk retention mean in insurance?

In a general sense, risk retention is a percentage of your premium that you keep in the company. It’s a way to ensure you still have enough capital to pay claims after you cover your operating expenses. If you don’t have risk retention, you could end up losing more money than you’ve earned in premiums.

What does the word risk retention mean in insurance?

Risk retention is the amount of money an insurer pays to cover the difference between the actual cost of a claim and the sum insured. For example, if you have a $100,000 policy and your claim costs $100,000, you'd receive a payment of $100,000. If your claim costs $200,000, you'd owe the insurer $100,000 plus a 20% risk retention.

What does risk retention mean in insurance coverage online?

It's possible to get affordable insurance online through an insurance agency or an online broker. However, some insurance companies require you to retain a portion of the risk with the company. This is called risk retention. It ensures the company has a stake in the profitability of your policy.

What does risk retention mean in insurance coverage?

There are two primary types of risk retentions: deductible and co-insurance. Deductibles are the amount you are responsible for before your insurer begins covering the cost of a loss. For example, let’s say you have a $500 deductible on your home insurance policy. If your home is damaged in a fire, you will pay the first $500 in costs before your insurer begins reimbursing you.

What does risk retention mean in life insurance?

In life insurance, risk retention is a term used to describe the portion of premiums that an insurer keeps instead of passing it on to the policyholder. It’s different from the commission that an agent or company might charge. Generally, the risk retention amount is a percentage of the premium, so the higher the risk retention percentage, the lower your premium might be.