Coinsurance Plan Of Reinsurance
What Does Coinsurance Plan Of Reinsurance Mean?
A coinsurance plan of reinsurance occurs when an insurance company transfers part of its financial responsibility for a life insurance policy to a reinsurer. This responsibility involves a portion of the death benefit. When a claim is made, the reinsurer provides the fixed amount to the insurance company, which then passes that amount to the beneficiary.
Insuranceopedia Explains Coinsurance Plan Of Reinsurance
Reinsurance is a method insurance companies use to protect themselves from the risk of insolvency caused by a large number of policyholders making claims. To mitigate this risk, insurers transfer (or cede) a portion of their risks to reinsurers.
Life insurance is the most common type of insurance, with one of its key features being the death benefit. The death benefit is often a large sum, designed to provide income and maintain the lifestyle of the beneficiary. As previously mentioned, a scenario in which many claims for death benefits are made is possible because death is both inevitable and unpredictable. To safeguard against this, insurance companies transfer a portion of the death benefit of life insurance policies to reinsurers, protecting themselves from financial strain in such cases.
