Both insurance and reinsurance offer financial protection against potential losses. Although they are similar in concept, they differ greatly in how they are used and who uses them. Take out insurance to protect against possible property loss. Who will protect the insurance against a possible loss of property? If the damage is minor, the company is likely self-insured. However, to protect themselves from large losses, they buy reinsurance.
Insurance is a contract. Buyers pay a fee (premium) for a contract/policy, the insurance company must be prepared to protect the buyer from a reputation covered by the police.
Reinsurance is insurance that was taken out by an insurance company from other insurance companies to control your rights. It was up to losses or losses and the insurance company to ensure more people in case of damage without fear of bankruptcy was to assess the claims of several policyholders at the same time. In some reinsurance contracts, several insurers pool their policies and impose the risk on several insurers. longer on a global scale.
Insurance and reinsurance are similar in many ways. Insurance is purchased to protect against covered losses. Reinsurance protects the insurance company from too many losses. Both contract the cost of the loss to the company that issued the policy. They both have franchises. For an insurance policy that covers a home against fire, it can be $ 1,500. For a reinsurance policy that covers an insurance company against a devastating fire that destroys hundreds of homes, that policy could be as high as $ 45 million.
State insurance officials regulate both insurance and reinsurance. However, insurance policies are usually contracted with companies authorized to offer policies in a single state, while reinsurance policies are usually contracted across national or even international borders. Reinsurance companies can be special departments of large insurance conglomerates or companies that only conduct reinsurance business. Regular insurance policies can be purchased to cover a wide variety of needs, such as home, car, life, or disability.
Reinsurance policies are divided into two types: contracts that cover a range of policies from one or more insurers over a long period of time and optional contracts that cover a specific risk and are valued and purchased separately from other reinsurance policies. the insurer. Think of the optional policy as a separate reinsurance policy written for something the contract wouldn’t cover, usually because the potential damage is so much greater. For example, a marine insurer may have conventional reinsurance for most of the ships it covers but negotiates optional contracts for an extremely expensive ship.