Loss Settlement Amount

Dictionary Says

Definition of 'Loss Settlement Amount'


A term used to denote the amount of a homeowner's insurance settlement. Homeowners are typically required to carry insurance that will cover at least 80% of the replacement value of their house. The loss settlement amount, the funds that the insurance company pays out to the homeowner, may be less than the amount of full coverage if the 80% coinsurance requirement is not met.

Investopedia Says

Investopedia explains 'Loss Settlement Amount'


The loss settlement formula works like this: If a homeowner with a $400,000 house carries only $300,000 of coverage, and sustains a loss of $150,000 from a fire, then less than the total amount of $150,000 will be reimbursed. The amount to be paid is computed by dividing the amount of insurance carried by the 80% requirement. This comes to $300,000 / $320,000 (80% of $400,000). The quotient is 0.94. Multiply this amount by the loss of $150,000 to get $140,625. This is the amount that will be reimbursed.



comments powered by Disqus
Hot Definitions
  1. Earnings Call

    A conference call between the management of a public company, analysts, investors and the media to discuss the financial results during a given reporting period such as a quarter or a fiscal year.
  2. Legal Monopoly

    A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated.
  3. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  4. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  5. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  6. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
Trading Center