Active Retention

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DEFINITION of 'Active Retention'

The practice of protecting against a loss via the designation of specific funds to pay for the expected amount of the loss. This contrasts to passive retention, in which no money is set aside to cover expected losses.

INVESTOPEDIA EXPLAINS 'Active Retention'

The process of active retention makes it possible to protect against losses of relatively small amounts that occur regularly. It is regarded as a form of self-insurance. One of the benefits of active retention is the avoidance of the administrative costs associated with seeking insurance from another party.

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