Retention
What is a Retention?
Retention may refer to a variety of insurance-related concepts, but in the context of Directors & Officers (D&O) insurance, it simply means the amount of risk that the policyholder agrees to retain in a policy. Generally, this is the amount of risk that the policyholder is responsible for paying before the insurance company pays out on a claim.
Retention in More Detail
When it comes to D&O insurance, the retention amount is usually the deductible. In other words, the policyholder agrees to pay up to a certain amount out of pocket before the insurance company will cover any remaining costs. This is done in order to limit the insurer’s exposure to risk.
The retention amount can vary greatly depending on the type of D&O coverage and the overall risk profile of the policyholder. For example, a high-risk company may opt for a higher retention amount in order to limit its exposure to liability. On the other hand, a low-risk company may choose a lower retention amount in order to get more coverage from the insurer.
Overall, retention is an important concept to understand when it comes to D&O insurance policies. It can help policyholders limit their exposure to risk while also allowing the insurer to provide more coverage. Understanding a policy’s retention amount can help policyholders make more informed decisions about their coverage.
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