Reinsurance

Insurance has been on my mind since a tree fell on my house last month and then I saw this word, reinsurance, in the paper and my curiosity got the better of me. I looked up this definition for reinsurance: The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Ok, I read this definition a couple of times and decided that it still needed clarification so what reinsurance is really all about is making sure the insurance company you keep has enough money to cover the losses you may need covered and in the case of big disasters (think hurricane season) the insurance companies may need their own insurance in case they don’t have enough money for you when they are contracted to give it to you. I think this is possibly the only way insurance companies can cope with the resulting big claims like the ones they might get when a hurricane like Katrina or Sandy strikes. Reinsurance equals reassurance for the insurers, I figure and also in turn reassurance for the insured. Apparently reinsurance isn't just for property insurance but also for life insurance too. And apparently reinsurance is good for Florida’s property insurance policyholders because it reduces the risk of them having hundreds of dollars of post event assessments added to their insurance bills. The part about having extra fees added to my insurance bill? That part I understand, it’s the part I want to be reassured won’t happen.