Loss Severity
What Does Loss Severity Mean?
Loss severity refers to the financial value of a loss. This term applies to any type of insurance loss. Loss severity must be calculated to ensure claims are properly filed and that both insurance companies and policyholders understand exactly how much money should be paid to the policyholder.
Insuranceopedia Explains Loss Severity
Often, insurance policies cover total losses regardless of the loss severity. However, this is not always the case. For example, many health insurance policies have a maximum coverage limit that may be reached before the full losses are covered. In cases where the loss severity exceeds the coverage amount, the policyholder must pay out of pocket to cover the difference unless they have secondary insurance. A secondary insurance policy can help cover the losses not covered by the primary insurance policy.
