Large Loss Principle
Definition of "Large loss principle"
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.
Popular Insurance Terms
owner of property has an insurable interest because of the expectation of monetary loss if that property is damaged or destroyed. creditor of an insured has an insurable interest in ...
Income paid for a specified number of years from an annuity. ...
Providing coverage for physicians' fees, expenses associated with nonsurgical care whether in the insured's home, hospital, or the physician's office, and expenses connected with X-rays and ...
Retirement plan in which income payments continue until the death of the first of two or more annuitants. This type of annuity is not appropriate for a husband and wife since at the death ...
Life insurance policy in which the cash value and in some circumstances the death benefit will vary according to the investment performance of an underlying portfolio usually comprised of ...
Same as term: Free Examination "free Look" Period: right, in most states, of an insured to have 10 days in which to examine an insurance policy, and if not satisfied, to return it to the ...
Small face amount life insurance policy. ...
Type of health insurance under which an insured's coverage extends to all family members if they are residents of the insured's household. Insures all medical expenses (except those ...
Section of the "Unfair Trade Practices Code" of most states that declares the use of coercion to be in violation of the state code. ...
Have a question or comment?
We're here to help.