Which term refers to unpaid damage in insurance settings?

• A. Underwriting
• B. Subrogation
• C. Deductible
• D. Reserves

Answer: (B)

The term that refers to unpaid damage in insurance settings is best described as "reserves." Reserves are the funds that an insurance company sets aside to cover future claims that have already been incurred but not yet paid. This includes the estimated costs of pending claims and the anticipated payouts required to settle those claims.

Understanding this concept is crucial in insurance, as it reflects the insurer's obligation to maintain enough capital to ensure that they can honor claims made by policyholders. While underwriting and subrogation are significant aspects of insurance processes, they do not directly relate to the concept of unpaid damage. Underwriting involves assessing risk and determining policy terms, while subrogation is the practice of getting reimbursement from a third party who is responsible for the incurred losses. Deductibles refer to the amount of loss an insured individual must cover before the insurance policy kicks in. Thus, reserves specifically address the potential liabilities associated with unpaid damages.