8 Difference Between Insurance And Reinsurance

1. Insurance alludes to a contract between two parties wherein one party promises to indemnify the other in case of loss or death. Reinsurance means insurance taken up by an insurance company when it does not wish to bear entire risk of loss and thus shares it with some other insurer. 2. For an insurance policy covering a home from fire, it might be $1,500. For a reinsurance policy covering an insurance company from a wildfire destroying hundreds of homes, it might be $45 million. 3. Insurance is an equitable transfer of the risk loss, from insurer to insured in exchange for money. In reinsurance agreement, ceding company and the reinsurer signs a deal, which reflects the conditions on which insurer agree to pay a share of the claims incurred by the ceding company. 4. Insurance is a tool used by individuals to manage risk. Reinsurance is a tool used by insurance companies to manage risk. 5. Premium: INSURANCE: Paid by an individual, is received by an insurance company. REINSURANCE: Paid for reinsurance is divided among the insurance companies in specified ratio.