What does the term "reciprocal" refer to in the context of insurance?

In the context of insurance, the term "reciprocal" refers to insurance that arises from reciprocal agreements among subscribers. This arrangement involves members, often referred to as "subscribers," who agree to share risk among themselves. Each subscriber pays into a pooled fund, and in the event that one member incurs a loss, the fund is used to compensate them. This collaborative structure allows for a mutual sharing of risks and benefits, fostering a sense of community and support among the participants.

The concept emphasizes the idea that the subscribers are both the insurers and the insured, creating a reciprocal relationship where members can rely on one another for coverage. This is different from more traditional insurance models where a specific company assumes all the risk and provides coverage exclusively to policyholders based on their individual premiums.

Other options listed do not accurately encapsulate the nature of reciprocal insurance. For instance, insurance fully subsidized by the government pertains to a different category of coverage, while one-sided insurance agreements involve situations where only one party has coverage, lacking the mutual aspect inherent in reciprocal arrangements.