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LSDefine
Simple English definitions for legal terms
absorbable risk
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A quick definition of absorbable risk:
Absorbable Risk: This is a type of risk that a company thinks it can handle on its own without needing to buy insurance. It means that if something bad happens, the company has enough money or resources to cover the cost of the damage or loss. For example, if a company has a small accident, they might be able to pay for the repairs themselves instead of making an insurance claim.
A more thorough explanation:
Definition: Absorbable risk refers to a potential loss that a company believes it can cover with its available capital or self-insurance.
Examples:
- A company has a reserve fund that it can use to cover unexpected losses.
- A company decides to self-insure against a certain type of risk, such as property damage.
These examples illustrate how a company can take on a certain level of risk and still feel confident that it can handle any losses that may occur. By having the resources to absorb the risk, the company can avoid the need to purchase insurance or rely on outside sources for financial assistance.