A closer look at a claims reserve

Image source: clmmag.theclm.org

Delos H. Yancey has a passion for helping senior citizens during retirement, and he does so through his company, State Mutual Insurance. He believes that above all, knowledge of insurance and everything surrounding it is key.

On that note, here’s a topic Mr. Yancey has touched on a few times before – claims reserve, also known as a balance sheet reserve.

A claims reserve by definition is funds an insurance company has kept to be used in the future. This money is often used to settle claims that have yet to be settled. On balance sheets, claims reserves are viewed as a liability, but in reality, they are more akin to a safety net.

Claims reserves exist because of the extended amount of time it typically takes to process a claim, and because claims have to be covered. Policyholders usually receive money from claims reserves.

Image source: insuranceopedia.com

 On the flip side, claims reserves come from premiums, which can be a burden to policyholders in the form of payment obligations. However, insurance companies do all they can to balance the amount charged from policyholders with history and the current market as factors. Insurance companies generally shoulder the cost in the event of an unforeseen occurrence such as an accident. This is why claims reserves are set aside.

For Delos H. Yancey of State Mutual Insurance, claims reserves are a way for insurance companies to settle what they owe policyholders in the future.

Led by Delos H. Yancey III, State Mutual Insurance helps older Americans maintain a sense of security through products designed specifically for their benefit. For more information on State Mutual Insurance, visit its official website.