First Loss Insurance Policy
Definition
- A property insurance policy that provides only partial coverage for insured assets. A first loss insurance policy is useful for businesses with a large amount of inventory but little risk of large-scale theft. By insuring only a portion of their property, the policyholder pays lower premiums while still receiving some measure of protection. In exchange for the insurance company allowing the policyholder to under-insure their property, the insured agrees to accept a payout moderately less than the full value of damaged or stolen assets. For example, if a warehouse has $3 million worth of goods but the probability of thieves stealing more than $100,000 worth of goods at one time is small, then a first loss insurance policy could be ideal.
Synonyms
first-loss policy, partial compensation, partial insurance
Related Terms and Acronyms
- Commercial Property Insurance — Definition,
- Property insurance that provides coverage for damages to commercial property due to named perils such as fire or theft.
- Insurable Interest — Definition,
- Something of sufficient worth and benefit that an individual or entity would have reason to insure against its lost.
- Insurance Policy — Definition,
- A legal contract between an insurer and entity that specifies what the insurer is required to cover and any benefits the insured entity is entitled to.
- Loss Settlement Amount — Definition,
- The percentage of damages an insurer is contractually obligated to pay for after a claim.
- Property Insurance — Definition,
- Insurance that provides coverage for damages to property from a number of perils.
- Self Insurance — Definition,
- Setting aside money or assets for a potential future loss.
- Underinsurance — Definition,
- When the amount of insurance coverage on an asset is less than the asset's full value.
- Value Reporting Form — Definition,
- A form used to keep track of a business's current inventory value.
