Losses Incurred

What Does Losses Incurred Mean?

Losses incurred refer to the amount of benefits paid out to policyholders over a given period, usually a year, plus adjustments to the loss reserves in the previous period.

Insuranceopedia Explains Losses Incurred

Insurance companies would prefer to collect premiums and never pay out benefits; however, accidents and other injurious events occur, and policyholders file claims. Therefore, insurers set aside loss reserves to cover claims from the policies they underwrite. They estimate the losses they may incur to determine a suitable amount to set aside, which may fall short or be adequate. In case the loss reserves cannot cover benefit payments, insurers would have to dip into their surplus.