YOU ASK:

What is the definition of Severity?

WE ANSWER:

Severity refers to the extent of the loss incurred.

When computing for premium rates, the insurance company also considers the possible amount of damage an insured risk will cause. For example, if the insurance company will cover a house against a fire, it will also look into how much possible damage the fire may cause.

The insurance company often uses a severity rate, something that is used to compute for the premiums. The severity rate is the ratio that pertains to the extent of loss with respect to the property or assets exposed to the loss during a specific time period.

Was this insurance question and its answer useful?
Not a bit
  • Currently 4/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
 Very useful
Have an Insurance Question? Ask For Insurance
Insurance glossary by alphabet:
  1. A |
  2. B |
  3. C |
  4. D |
  5. E |
  6. F |
  7. G |
  8. H |
  9. I |
  10. J |
  11. K |
  12. L |
  13. M |
  14. N |
  15. O |
  16. P |
  17. R |
  18. S |
  19. T |
  20. U |
  21. V |
  22. W |
Link this answer Email to a friend Print Bookmark or Share