What does a settlement in insurance refer to?

• A. A method for increasing premiums
• B. A resolution of a dispute between an insurer and a claimant
• C. A formal complaint by the insured
• D. A cancellation of an insurance policy

Answer: (B)

A settlement in insurance refers to a resolution of a dispute between an insurer and a claimant. In the context of insurance, this typically involves negotiating and agreeing on the amount the insurer will pay to the claimant (such as an insured individual or a third party) to cover a loss, damage, or liability as addressed in the insurance policy. Settlements often arise after claims are filed and may involve discussions over the validity of the claim and the extent of the insurer's liability.

By reaching a settlement, both parties can avoid lengthy and costly litigation, providing a quicker resolution to the claim. This is a common practice in many types of insurance, including property, casualty, and liability coverage. It is an essential aspect of the insurance process, emphasizing the goal of both insurers and claimants to arrive at an agreeable outcome given the circumstances of the claim.