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Small Loss Principle

Definition of "Small loss principle"

Sharon Wright
  Berkshire Hathaway HomeServices

Statement regarding an insured's retention of low-severity risks because they are not catastrophic, and can be absorbed without having a dramatic effect on the financial structure of a business or individual. Insurance purchased for small-loss coverage is, in effect, swapping dollars with the insurance company, since the premium charged reflects the individual's expected losses plus loadings for the insurance company's expenses, profit margin, and contingencies.

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