What is the difference between excess insurance and reinsurance?
Excess insurance covers specific amounts beyond the limits in the primary policy. Reinsurance is when insurers pass a portion of their policies onto other insurers to reduce the financial cost in the event a claim is paid out.
In the case of insurance, the insured transfers risk arising from unforeseen events to the insurer in exchange for premium payment. On the other hand, reinsurance involves transferring the risk of one insurance company to another in exchange for premiums paid at regular intervals.
For example, if your general liability insurance limit is $1 million and you're sued for $1.5 million, an excess liability policy would cover the $500,000 that's not covered by your underlying general liability insurance.
Insurance excess is the amount you have to pay towards the overall cost of an insurance claim. It's usually a pre-agreed amount. Your insurer will then contribute the rest – up to the limit of the cover.
Reinsurance is insurance for insurance companies. It's a way of transferring some of the financial risk insurance companies assume in insuring cars, homes and businesses to another insurance company, the reinsurer.
Insurance is a legal agreement between an insurer and an insured in which the former guarantees to defend the latter in the event of damage or death. Reinsurance is the insurance a firm purchase to lessen severe losses when it decides not to absorb the entire loss risk and instead shares it with another insurer.
Facultative reinsurance is one of two types of reinsurance (the other type of reinsurance is called treaty reinsurance). Facultative reinsurance is considered to be more of a one-time transactional deal, while treaty reinsurance is typically part of a long-term arrangement of coverage between two parties.
You pay the excess in the event of any claim made on your insurance policy regardless of who's to blame. However, if it's proved the accident was the other person's fault and the full cost is recovered from their insurer, you may be able to recover this amount.
Excess and surplus lines insurance covers policyholders that have unique risks, extra high risks, and/or poor loss history. These candidates would generally be unable to obtain insurance through standard lines, meaning that there's a huge gap in coverage for them.
So do I need excess protection? Unlike car insurance, it's not a legal requirement to have excess protection insurance. But by adding it, you don't have to worry about being landed with a hefty bill if your car gets damaged by an unidentified driver.
What is high excess insurance?
The higher the amount of excess you can pay, the cheaper your premium will be. It suggests you're less likely to make low-value claims and reduces the amount an insurer will have to pay out should you make a claim. If you increase your excess, you must be sure you are able to pay this should you make a claim.
When you pay the excess for a car accident which isn't your fault, you may need to claim this back from the insurance company of the driver who caused the accident once the claim is settled, if you don't have legal expenses cover to pay this for you.
Excess is the amount you'll pay for every completed repair. The higher the excess fee you select, the lower the monthly or annual price you pay. You can usually choose the amount of excess you'd like to pay when you buy your cover. Our excess options tend to be £0, £60 and £99.
Reinsurers play a major role for insurance companies as they allow the latter to help transfer risk, reduce capital requirements, and lower claimant payouts. Reinsurers generate revenue by identifying and accepting policies that they believe are less risky and reinvesting the insurance premiums they receive.
Several common reasons for reinsurance include: 1) expanding the insurance company's capacity; 2) stabilizing underwriting results; 3) financing; 4) providing catastrophe protection; 5) withdrawing from a line or class of business; 6) spreading risk; and 7) acquiring expertise.
- Can be expensive, as reinsurers charge a premium for assuming a portion of the insurer's risk.
- This may result in a loss of control for the insurer, as they are relying on the reinsurer to manage a portion of their risk.
Virtually all life insurers buy reinsurance to improve their risk profile.
Reinsurance allows insurance companies to stay solvent by restricting their losses. Sharing the risk also enables them to honour claims raised by people without worrying about too many people raising claims at one time.
An example would be where an insurer provides policies to multiple homeowners within a city. The insurer, who is the ceding party, cedes some of the risk involved with underwriting the numerous policies to the reinsurer across a period of, say, 15 years.
Who insures reinsurers?
The Bottom Line. Reinsurance, often called "insurance for insurance companies," results from a contract between a reinsurer and an insurer. In it, the insurance company—known as the ceding party or cedent—transfers some of its insured risk to the reinsurance company.
Three reinsurance methods are usual: Treaty Reinsurance, Facultative Reinsurance and a hybrid mode with elements from the Treaty and the Facultative. This is the most common cession method within the reinsurance market.
If you have a £200 excess, and your treatment bill is £10,000: you'd pay £200 to the hospital or treatment provider, and we'd pay £9,800. If the treatment continued into the next policy year, another excess would apply, so you'd pay £200 towards your first treatment bill in the new policy year.
An excess is paid per incident. For example, suppose you have a minor accident involving only cosmetic damage to the front of your car. As you drive to the repairer, you run into the back of another car. These are 2 separate incidents, so you need to lodge a separate claim for each, and so pay 2 excesses.
When you take out private health insurance, you're offered an excess with your cover. An excess is the amount you will have to pay when you make a claim on your health insurance policy. Having an excess means that you have to pay part of your treatment costs up to the amount of your excess.
