What Does Commutation Clause Mean?

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What does Commutation Clause mean? Read on to discover the definition & meaning of the term Commutation Clause - to help you better understand the language used in insurance policies.

Commutation Clause

Commutation Clause

Provision in a reinsurance agreement that allows for payment of cash by one party to release the other from all future obligations to pay claims after a certain time period. Common in long-term disability insurance, where the reinsurer wishes to settle and discharge all future obligations for claims that have a very long payment pattern. Also used in finite risk reinsurance.

We hope the you have a better understanding of the meaning of Commutation Clause.

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