can be purchased by self-employers from private insurance to protect against the potenital risk of high loss.
- Reinsurance essentially is insurance for insurance companies (and, sometimes, for other organizations that face risk, such as employers that self-insure their employees' health care costs).
- not activated until a deductible is met
- there is a "ceiling," or upper limit, on reinsurable expenses.
- have coinsurance rates (amounts that the policyholder must pay for particular services) that apply to expenses between the deductible and ceiling.
providing protection to insurers for the risk of extraordinarily high costs incurred by any individual,
insurers do not have to build such reserves into their premiums, which can thus be lower.