Maximum Probable Loss
What Does Maximum Probable Loss Mean?
The Maximum Probable Loss (MPL) is the greatest loss an insurance policyholder can reasonably expect to face if a specific event, such as a fire, were to occur.
Maximum probable losses are generally inversely proportional to the size of the insured structure or property. This means that the larger a property is, the more difficult it is to completely destroy, leading to a lower probability of a total loss.
Insuranceopedia Explains Maximum Probable Loss
It is crucial for insurance companies to be aware of the Maximum Probable Loss (MPL) for their policies, as these figures help them assess the potential financial risk associated with each policy. If an insurance company determines that the MPL for a particular asset is too high, they may choose not to insure the asset or decide not to renew the policy upon its expiration in order to protect their profitability.
