Definition - What does Active Retention mean?
Active retention is the act of saving financial resources with the intention of using them to compensate for losses in the future. This is a form of self-insurance that acts as an alternative to paying premiums to an insurance company for coverage.
Insuranceopedia explains Active Retention
Insurance is the obvious choice for risk coverage and people or entities who want to protect themselves from future losses usually do so by purchasing an insurance policy. But a person or an entity may use their own funds instead of availing themselves of independent insurance coverage.
A company saving money periodically for the purpose of providing a pension for its employees in the future is engaging in active retention. An individual who sets aside a portion of their income for hospitalization or health care is another example of active retention.
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