What Does Reciprocal Mean?

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



An unincorporated group of individuals or organizations (subscribers) that agree to pool risks for the purpose of paying the cost of retained losses and purchasing reinsurance. Also known as interinsurance exchanges, they are managed by an attorney-in-fact. Subscribers have contingent liability (several and proportionate) for paying the losses of the reciprocal, but if adequate capital exists, nonassessable policies may be issued. Under federal tax law, subscribers' surplus is not taxed; income is taxed when distributed.

We hope the you have a better understanding of the meaning of Reciprocal.

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