Forums » Life Insurance

• T Ghosh

  

  • 144 posts
   

  February 28, 2014 7:01 AM IST

  Concept of Risk:

                

                  Risk exists when there is uncertainty about the future.

   

  Two kinds of Risks:

                

  • Speculative Risk:

                     This involves three possible outcomes: loss, gain or no change.

   

  • Pure Risk:

                     This involves no possibility of gain; either a loss occurs or no loss occurs.

   

   

  The purpose of insurance is to compensate for financial loss, not to provide an opportunity for financial gain.

   

  Risk Management:

                 

  • Avoiding Risk:
  • • The method of managing risk is simply to avoid risk altogether.
    • We can avoid the risk of financial loss in the stock market by not investing in it.

   

  Demerits:

   

  • Avoiding risk is not effective or practical.

   

  • Controlling Risk:
    • We can try to control risk by taking steps to prevent or reduce losses.

   

  • Accepting Risk:
  • To accept, or retain a risk is to assume all financial responsibility for that risk.
  • Self-insurance is a risk-management technique by which a person or business accepts financial responsibility for losses associated with specific risks.

   

  • Transferring Risk:
  • Transferring a risk means shifting the financial responsibility to another party, generally in exchange for a fee.