What is insurance retention limit

Definition: The maximum amount of risk retained by an insurer per life is called retention. Beyond that, the insurer cedes the excess risk to a reinsurer. The point beyond which the insurer cedes the risk to the reinsurer is called retention limit.

What does insurance retention mean?

Simply stated, insurance policy deductibles or retentions are a dollar threshold that must be satisfied before an insurer will pay any defense or indemnity costs on a claim. Many insureds seek to contain their insurance premium costs by purchasing policies with substantial six to nine-figure retentions or deductibles.

What is an example of retention in insurance?

For instance, if a car insurance policy has a $1,000 deductible and a loss is valued at $2,500, then the application of retention for that policy would clarify that the policyholder is responsible for payment of the $1,000 deductible. The insurer's liability would thus be limited to $1,500.

Is insurance retention the same as excess?

Many even within the insurance industry consider a Retention, Deductible and Excess interchangeable. These concepts are not the same.

Is retained limit the same as deductible?

The answer to the question what's the difference between a deductible and a self insured retention is that deductibles reduce the amount of insurance available whereas a self insured retention is applied and the limit of insurance is fully available above that amount.