Understanding Insurance Reserves

Three-pink-piggy-banks-in-a-rowUnderstanding insurance reserves can help settle a claim. A reserve is a pot of money set aside to pay for a specific expense category. Typically, there are separate pots for indemnity, medical and med-legal expenses.

Sometimes a negotiator finds that a claim can be closed for an amount more than remains in the indemnity and medical reserves. However, part of the settlement can be classified as a med-legal expense. By spending the money from the med-legal reserve, settlement can be achieved while staying within current reserve limits.

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