# What is the ratio between money paid by insurance vs total premium called?

On average, everyone loses money in buying insurance.

That's understandable. Insurance have overhead costs and insurance companies want to make profit.

Not all premium is paid to cover coverage.

There is a ratio. Say the ratio is 90% or 80%. What's that ratio is called?

coverage to premium ratio. What is it called?

I want to see this from customers' point of view.

• When you say 'from a customers point of view', what do you mean? As in - the ratio of your expected losses compared to premiums, without considering admin costs of running the insurance company? – Grade 'Eh' Bacon Mar 30 '20 at 14:33
• Basically yea. I don't care how much money the insurance company spend for whatever. For every \$100, I want to know how much on average I will get in reimbursement? \$80? That depends on probability I got sick times cost of sickness I guess. Of course, I do not know the exact numbers of those. – user4234 Mar 31 '20 at 10:40
• Yes, then what you want is the 'loss ratio'; see the answer provided. – Grade 'Eh' Bacon Mar 31 '20 at 12:47

## 1 Answer

There are two ratios of interest: combined ratio and loss ratio.

The loss ratio is calculated by dividing the total incurred losses by the total collected insurance premiums.

A combined ratio measures the money flowing out of an insurance company in the form of dividends, expenses, and losses.

Is any of these what you were looking for?