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Spread Risk: Insurance Definition

By Compuquotes Team on March 27th, 2008

SPREAD OF RISK:

Definition:

  • The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. (See Adverse selection)

Information provided by Insurance Information Institute

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