A glossary of commonly used general insurance and risk management terms.

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RATE – The per unit cost of insurance. (See also Premium).

RECIPROCAL EXCHANGE (INTER INSURANCE EXCHANGE) – A means of insurance whereby each subscriber appoints a central underwriter as attorney in fact for the purpose of sharing insurance costs with others insured in the same group. Generally a separate account is open for each subscriber and a credit is shown for the original premium paid and any other credits. The cost of all overhead and all losses are proportioned and charged against all accounts at regular intervals. The profit or loss of a group is also calculated and credited or charged proportionately to the individual account. If at the end of the year, the account still shows a credit balance, that credit balance can be carried forward into the following year. If there is a deficit in the account, the subscriber must pay up.

REIMBURSEMENT – Payment of an amount of money related to the amount of the loss to or on behalf of the insured upon the occurrence of a defined loss.

REINSTATEMENT – Restoring a lapsed policy back in force. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.


  1. A contract of indemnity against liability by which the insurance company procures another insurance to insure it against loss or liability by reason of the original insurance.
  2. Insurance by one insurance company of all or part of a risk accepted by it with another insurance company which agrees to reimburse the insurance company for the portion of the claim reinsured. The insurance company obtaining the reinsurance is called the “ceding insurance company;” the insurance company issuing the reinsurance is called the “reinsurer.” A reinsurer may, in turn, seek reinsurance on some portion of the risk it has reinsured, a process known as “retrocession.”

RENEWAL – The continuation in full force and effect of something that is about to expire. With an insurance policy it is made either by the issuance of a new policy or renewal receipt or certificate, to take effect upon the expiration of the old policy.

REPLACEMENT COST – The cost of replacing property without deduction for depreciation.

RIDER – Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.


  1. A chance of loss.
  2. A person or thing insured. (Impaired or substandard risk: An applicant whose physical condition or moral habits do not meet the standard on which the rate is based).

RISK MANAGEMENT – Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

ROBBERY – The felonious taking, either by force or by fear of force, of the personal property of another, commonly known as “hold-up.”

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