Glossary

Total cost of risk (TCOR)

The full annual cost of carrying risk: insurance premiums, losses you retain, and loss-control and administrative spending, often shown as a share of revenue.

Also called: TCOR, cost of risk, total cost of insurance and risk

Total cost of risk adds up everything a company spends because of risk, not just the insurance bill. The usual formula: TCOR = insurance premiums + retained losses (deductibles, self-insured retentions and uninsured claims) + loss-control spending + administrative costs such as broker fees and claims handling. Dividing by revenue, or by payroll, vehicles or employees, gives a rate that can be tracked year over year and compared with similar companies.

Say a manufacturer with $50 million of revenue pays $1,000,000 in premiums, absorbs $300,000 in losses under its deductibles, spends $100,000 on safety and pays $50,000 for broker and claims administration (hypothetical). TCOR is $1,450,000, or 2.9% of revenue.

The measure exposes trade-offs that a premium comparison hides. Raising a deductible lowers premium but raises retained losses, and only TCOR shows whether the net result is a saving. Retained losses are lumpy, so judge a retention decision on several years of losses, with reserves for claims still open, and not on one good year. Safety spending can cut TCOR even though it raises one line of it. The Total cost of risk (TCOR) calculator builds the total from your inputs, and the guide on Total cost of risk (TCOR): what it includes and how to calculate it covers benchmarking.

Last reviewed October 10, 2026

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Related terms

Retention The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds. Risk management Identifying, assessing and treating threats to an organization by avoiding, reducing, transferring or retaining them; insurance is one tool among several. Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss. Large deductible program A policy where the insurer pays claims and then bills you for losses up to a high per-claim deductible, in return for lower premium and secured collateral. Loss control The inspections, safety programs and physical improvements that a business and its insurer use to make claims less frequent and less severe.

Related guides

How to budget for business insurance Build an insurance budget from premium, deductibles, audits, taxes and fees, then test it against cash flow and total cost of risk, with a worked hypothetical. Enterprise risk management (ERM) explained What enterprise risk management is, how COSO's 2017 framework and ISO 31000 define it, how risk appetite works, and how an ERM program changes insurance buying. Is a captive right for your business? A feasibility checklist Premium volume, loss history, capital, collateral, tax and exit: the screening questions that tell you whether a captive is worth a feasibility study. Risk transfer vs retention: avoid, reduce, transfer or retain Every risk gets one of four responses: avoid, reduce, transfer or retain. How to choose using severity and capacity, with a worked deductible example. Total cost of risk (TCOR): what it includes and how to calculate it Total cost of risk adds premiums, retained losses, fees, safety spending and staff time into one yearly figure. The formula, a worked comparison and pitfalls. What a risk manager does, and when a business needs one What a risk manager does: find exposures, decide what to keep or insure, run the insurance program and claims, and when a business should hire one.

Related tools

Total cost of risk (TCOR) calculator Adds premiums, retained losses, fees, collateral, risk control and staff time into one annual cost of risk, and compares a current program with a proposed one.