Investopedia

Continue to Site »

First-Loss Policy

Filed Under »
Dictionary Says

Definition of 'First-Loss Policy'

A type of property insurance policy that provides only partial insurance. In the event of a claim, the policyholder agrees to accept an amount less than the full value of damaged, destroyed or stolen items/property. In return, the insurer agrees to not penalize the policyholder for under-insuring their goods or property.

First-loss policies are most commonly used in the case of theft or burglary insurance to insure against events where a total loss is extremely rare (i.e. the burglary of all goods contained in a large store). In a first-loss policy claim event, the policyholder does not seek compensation for losses below the first-loss level. Premiums are calculated proportionately - meaning they are not based on the full value of total goods or property.
Investopedia Says

Investopedia explains 'First-Loss Policy'

Let's consider an example of what a first-loss policy would cover. If a store owner held $2.5 million worth of goods in his/her store but only assumed that the most s/he could lose at any one time due to theft or burglary would be approximately $50,000, s/he might obtain a first-loss policy for that amount. In the event that the store was burglarized and the owner lost more than $125,000 worth of stock s/he would only be compensated for the $50,000 worth of loss as stated under the first-loss policy.

Articles Of Interest

  1.

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.

  2. Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.

  3. Don't Get Sued: 5 Tips To Protect Your Small Business

    Find out what you can do to limit risk and keep your business running smoothly.

  4. The History Of Insurance

    The first written policy appeared in Hammurabi's Code. Find out how it evolved from there.

  5. Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.

  6. Protect Your Company From Employee Lawsuits

    Understanding employment practices liability insurance is easy, once you know the basics.

  7. Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.

  8. Selecting And Managing Insurance Payouts

    Find out which settlement option is right for you before you recieve your funds.

  9. Tips For The Prospective Landlord

    Investing in rental property can generate serious income, but there's more to it than collecting rent.

  10. 12 Car Insurance Cost-Cutters

    If car costs are dragging you down, find out how to free yourself from some of the extra weight.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center