Partial Retention Can Reduce Premiums and Budgets
The Partial Retention of a risk can be thought of as either using a deductible or an umbrella to cover catastrophic events that would ruin certain insurance programs.
Your car insurance deductible can be thought of as a partial retention. If you have a $500 deductible on collision, you have a partial retention up to $500. A partial retention can reduce the insurance rates on any line of coverage by a large amount. The insurance carriers do not have to handle and pay any claims under the retention level. One must remember that insurance carriers finance the Allocated Loss Expenses (ALAE) for these claims.
These types of plans in Workers Compensation can either be a large deductible program or a self insured that has acquired reinsurance also known as excess insurance . The law of large numbers makes this decision a good risk management technique.
The umbrella retention contains an aggregate (total) amount that the excess insurance carrier starts paying after reaching the aggregate amount. Once again, the aggregate amount results in a great risk management technique. The self insured company may not have enough funding to cover catastrophic events.
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