Ultimate Net Loss

Filed Under »
Dictionary Says

Definition of 'Ultimate Net Loss'

A party's total financial obligation when an insured event occurs. The insured's ultimate net loss from costs such as property damage, medical expenses and legal fees will be offset by the portion of the loss that is paid by the insurance company (usually the amount of the claim that exceeds the insured's deductible, up to the policy maximum). Thus, the insured's loss will often be limited to the policy deductible unless the total loss exceeds the policy maximum.

An insurance company's ultimate net loss from a claim may be offset by the salvage value of any recoverable items, awards from successful claims against third parties, money from reinsurance and the policyholder's deductible and policy maximum. Ultimate net loss can be a generic term that refers to the total amount of any loss, but in finance it is most commonly used to refer to an insurance company's total loss from a policyholder's claim.

Investopedia Says

Investopedia explains 'Ultimate Net Loss'

Insurance companies can protect themselves against large ultimate net losses by sharing policy risk with reinsurers. When an insurer shares a portion of the premiums it collects with a reinsurance company, it gains protection against a portion of its claims losses. For example, an insurance company might receive $30,000 in annual premiums for a $10 million policy. To protect itself against the threat of a $10 million loss, the insurance company might cede $15,000 of the annual premium to a reinsurer, who would agree to cover $5 million of the potential loss.

Articles Of Interest

  1. It's Raining Lawsuits: Do You Need An Umbrella Policy?

    This type of insurance protects your assets and future wages against lawsuits. Find out if it might benefit you.
  2. How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  3. Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  4. How To Insure Your Most Important Asset - Yourself

    Insuring your human capital is something often overlooked. Don't make the mistake of leaving your biggest asset unprotected.
  5. What is reinsurance?

    Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would experience in case of disaster. ...
  6. 5 Things You Should Know About The New Health Insurance Marketplace

    Here are five things you should know about the new Health Insurance Marketplace (AKA Health Insurance Exchange), which launches on October 1.
  7. What changes might I need to make to my insurance policy?

    The number one thing to remember about insurance is that, just like everything else, it changes over time. The top-of-the-line policy that you bought five years ago might not even be available ...
  8. The Beginner's Guide To Homeowners' Insurance

    Discover everything new homeowners need to know before they sign on the dotted line.
  9. Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  10. Why would you want a monthly benefit versus a daily benefit?

    An insurance benefit is the amount of money paid to or on behalf of the policyholder. Depending on what kind of insurance policy the policyholder signs up for, the payments are made directly ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...
  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center