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About Coverages and Reserves

When a customer purchases an insurance policy, the policy specifies which coverages are included in the policy. For example, for an auto policy there might be coverages for: towing and labor, rental car, collision, and bodily injury. Each of these coverages has an associated maximum amount covered and the deductible amount.

An adjuster must open a reserve for each coverage that applies to a claim. A reserve is an amount of money made available for payments in respect of claims. For example, if the claimant was involved in a collision accident, the adjuster must open a reserve for collision coverages. If the claimant was injured, the adjuster must open a bodily injury reserve.

The money that the insurance companies put aside cannot be used for anything else, therefore it is important to create the right amounts for reserves.

This task is a step in Process of Managing Claims.