Legal Definitions - interinsurance exchange

An interinsurance exchange is also known as a reciprocal exchange. It is a type of insurance organization where policyholders exchange insurance contracts with each other. Each policyholder is both an insurer and an insured. The policyholders pool their premiums and losses, and the exchange manages the funds and pays out claims.

For example, let's say there are ten policyholders in an interinsurance exchange. Each policyholder pays a premium into the exchange, and if one of them has a claim, the funds come from the pool of premiums. If there is money left over at the end of the year, it is returned to the policyholders as a dividend.

Another example is a group of farmers who form an interinsurance exchange to insure their crops. They each pay a premium into the exchange, and if one of them has a crop failure, the funds come from the pool of premiums. This allows the farmers to share the risk of crop failure and protect their livelihoods.