ASSESSABLE INSURANCE Meaning and
Definition
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Assessable insurance refers to a type of insurance policy where policyholders are potentially liable for additional payments in the event of a financial shortfall within the insurance company. In such policies, if the company's reserves and premiums are insufficient to cover the claims faced, policyholders may be assessed or charged an additional amount to meet the outstanding obligations.
The concept of assessable insurance is primarily found in mutual insurance companies, wherein policyholders are also considered part-owners of the company. These policyholders have the potential for shared liability in the event of financial strain on the insurer. The additional assessments or charges are typically proportional to the policyholder's original premium contribution.
The purpose of assessable insurance is to distribute the risk and financial burden among policyholders, ensuring the company's solvency and continuity in times of high claims or catastrophic events. It also incentivizes policyholders to be more actively involved in risk management and the overall health of the insurance company.
It is important to note that assessable insurance is relatively rare in modern insurance markets. Most insurance policies today are non-assessable, meaning that policyholders' financial obligations are limited to the premiums they have paid, providing them with greater predictability and protection from unexpected assessments.
In summary, assessable insurance is a type of policy in which policyholders may be required to make supplementary payments to an insurance company to cover claims if the company's resources are insufficient. This model primarily exists in mutual insurance companies, providing shared liability among policyholders to ensure the financial stability of the insurer.
Etymology of ASSESSABLE INSURANCE
The term "assessable insurance" combines the words "assessable" and "insurance".
The word "assessable" is derived from the verb "assess", which comes from the Old French word "assesser" or "assessier", meaning "to fix a tax or charge". It originated from the Latin word "assidere", meaning "to sit by". In this context, "assessable" refers to something that can be evaluated or appraised, particularly in terms of financial liability or taxation.
The word "insurance" has its roots in the Latin word "securus", meaning "safe" or "secure". This later evolved into the Old French word "uissance", which referred to a contract or agreement to indemnify against loss.
