First Loss Insurance Policy


  • A property insurance policy that provides only partial coverage for insured assets. A first loss insurance policy is useful for businesses with a large amount of inventory but little risk of large-scale theft. By insuring only a portion of their property, the policyholder pays lower premiums while still receiving some measure of protection. In exchange for the insurance company allowing the policyholder to under-insure their property, the insured agrees to accept a payout moderately less than the full value of damaged or stolen assets. For example, if a warehouse has $3 million worth of goods but the probability of thieves stealing more than $100,000 worth of goods at one time is small, then a first loss insurance policy could be ideal.

first-loss policy, partial compensation, partial insurance

Related Terms and Acronyms

  • Commercial Property Insurance Definition,
    • Property insurance that provides coverage for damages to commercial property due to named perils such as fire or theft.
  • Insurable Interest Definition,
    • Something of sufficient worth and benefit that an individual or entity would have reason to insure against its lost.
  • Insurance Policy Definition,
    • A legal contract between an insurer and entity that specifies what the insurer is required to cover and any benefits the insured entity is entitled to.
  • Loss Settlement Amount Definition,
    • The percentage of damages an insurer is contractually obligated to pay for after a claim.
  • Property Insurance Definition,
    • Insurance that provides coverage for damages to property from a number of perils.
  • Self Insurance Definition,
    • Setting aside money or assets for a potential future loss.
  • Underinsurance Definition,
    • When the amount of insurance coverage on an asset is less than the asset's full value.
  • Value Reporting Form Definition,
    • A form used to keep track of a business's current inventory value.
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