# Loss Ratio

*Insurance — Finicade finance glossary*

The loss ratio is claims paid divided by premiums earned — the share of your premium that returns to policyholders as benefits. It's a direct measure of value: US health insurers are legally required to hit a medical loss ratio of 80–85% and rebate the difference. A very low loss ratio in a consumer product usually signals cover that rarely pays out, which is the profile of most extended warranties.

**Formula:** `Loss ratio = Claims paid ÷ Premiums earned`

**Also known as:** claims ratio, medical loss ratio

**Related terms:** [Combined Ratio](https://finicade.com/glossary/combined-ratio), [Insurance Premium](https://finicade.com/glossary/insurance-premium), [Insurance Claim](https://finicade.com/glossary/claim), [Underwriting](https://finicade.com/glossary/underwriting), [Insurance Float](https://finicade.com/glossary/insurance-float)

Source: https://finicade.com/glossary/loss-ratio