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Double cover- Reinsurance - Concept of Insurance, Principles of Insurance, B com | Principles of Insurance PDF Download

Difference between Re-Insurance and Double Insurance

 

An insurance company generally undertakes the risks according to its capacity. Sometimes a company undertakes more risks than its capacity. It tires to share the risk with some company in case of its occurrence.

 

Re-Insurance

When the insurance company insures the risk with some other insurance company, it is called Re-insurance. The re-insurance may be for the full amount of the policy or for a part of it. In case of loss the first company will get compensation from the second company. The insured will be concerned only with the company from which it purchased insurance policy. Re-insurances is between insurance companies only.

 

Double Insurance

Double insurance means purchasing more than one policy for the same subject. A person may get two or more policies on his life. He can claim the amount of all these policies. The implications of double insurance are different in fire and marine insurance. When a person purchases two ore more policies for his property, he cannot claim the same amount as that of loss from different companies. He will be able to claim only total loss from one or more companies. The loss will be contributed by the insurance companies in proportion to the policies issued by them.

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FAQs on Double cover- Reinsurance - Concept of Insurance, Principles of Insurance, B com - Principles of Insurance

1. What is double cover reinsurance?
Ans. Double cover reinsurance is a type of reinsurance agreement where the reinsurer provides coverage to the insurer for a specific risk, but the insurer also retains a portion of that risk. In this arrangement, the insurer and the reinsurer share the risk and the premium for the coverage.
2. How does double cover reinsurance work?
Ans. In double cover reinsurance, the insurer transfers a portion of the risk to the reinsurer, who agrees to provide coverage for that portion. However, the insurer also retains a portion of the risk and continues to provide coverage for it. This arrangement allows the insurer to have additional protection against large claims or losses.
3. What are the benefits of double cover reinsurance?
Ans. Double cover reinsurance offers several benefits to both the insurer and the reinsurer. For the insurer, it provides an additional layer of protection against large claims or losses, reducing their exposure to risk. It also allows them to retain some control over the risk and maintain a direct relationship with the policyholder. For the reinsurer, it provides an opportunity to earn premium income while sharing the risk with the insurer.
4. What types of risks are typically covered under double cover reinsurance?
Ans. Double cover reinsurance can be used to cover various types of risks, such as natural disasters, liability claims, property damage, or any other risks that the insurer wants to transfer partially to the reinsurer. The specific risks covered will depend on the terms and conditions of the reinsurance agreement.
5. How is the premium calculated in double cover reinsurance?
Ans. The premium for double cover reinsurance is typically calculated based on the portion of the risk transferred to the reinsurer. The reinsurer will charge a premium for covering that portion, and the insurer will continue to charge its own premium for the portion of the risk retained. The total premium paid by the insurer will be the sum of the premium charged by the reinsurer and the premium charged by the insurer for the retained risk.
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