Large Loss Principle

Definition of "Large loss principle"

Brian Blake, Associate Broker real estate agent
Brian Blake, Associate Broker, Real Estate Agent Charles Rutenberg Realty

Transfer of high severity risks through the insurance contract to protect against catastrophic occurrences. While insurance is generally not the most cost-effective means of recovery of minor losses, an insured cannot predict catastrophes and thus set aside enough money to cover losses on a mathematical basis or to self-insure. Actuarial tables are based on the large loss principle: the larger the number of exposures, the more closely losses will match the probability of loss. In essence, a large number of insureds, each paying a modest sum into an insurance plan, can protect against the relatively few catastrophes that will strike some of their numbers.


Need help from a real estate agent?

Buy Sell Rent

I agree to receive FREE real estate advice.

Are you a realtor and want to become a member?

Residential Rental Commercial

I agree to receive FREE real estate advice.

Have a question or comment? We're here to help.


*** Your email address will remain confidential.


Popular Insurance Terms

Popular Insurance Questions