Expense constant

Expense constant,

Definition of Expense constant:

  1. For most types of insurance, policyholder premiums cover the insurance company’s own expenses while ensuring that the company has enough funds to cover any claims against its policyholders. For policies such as workers’ compensation, insurance companies charge an expense constant to cover their own costs when premiums do not suffice.

  2. An expense constant is a fixed amount added to an insurance policy to cover the cost of administering the policy. Workers’ compensation policies use expense constants most frequently, though other types of low premium policies also use them.

  3. A charge added to the premium amount. Most often, this is done to workers compensation policies, or other small policies that have low premiums. The cost of servicing these policies is too much to recoup on premiums alone.

Meaning of Expense constant & Expense constant Definition