Retention

Retention refers to the amount of risk that a person or business chooses to retain, rather than transferring it to an insurance company through a policy.

What is Retention?

Retention in insurance refers to the portion of a risk that an individual or business assumes themselves rather than transferring it to an insurance provider. This is often represented by deductibles, co-payments, or self-insured retention limits, where the insured party agrees to cover a portion of the loss before the insurance policy kicks in.

For example, in homeowners insurance, the deductible you pay before your insurance covers the rest is a form of retention. Businesses may also choose retention strategies by opting for higher deductibles to lower their premiums, taking on more responsibility for potential risks.

Retention strategies are commonly used by companies looking to manage insurance costs, balancing risk against the financial benefits of lower premiums. However, individuals and businesses must assess their ability to absorb losses before opting for higher retention levels.

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