• Fri. Dec 4th, 2020

Definition of Insurance and Risk

ByAuthor

Nov 8, 2020
Definition of Insurance and Risk

Insurance is a form of risk control that is carried out by transferring risk from one party to another, in this case an insurance company.

What is the meaning of insurance?

Insurance or coverage is an agreement whereby an insurer binds himself to an insured, by receiving a premium, for compensation to him due to a damage or loss of expected profit which he may suffer due to an uncertain event “. Another definition of insurance is a transfer of risk from the first party to another. In delegation, the rule of law and universal principles and teachings adhered to by the first party and other parties apply. From an economic point of view, insurance means a collection of funds that can be used to cover or compensate people who suffer a loss.

What are the benefits of insurance?

Besides being a form of risk control (financially), insurance also has various benefits which are classified into: main function, secondary function and additional function. The main function of insurance is to transfer risk, raise funds and balance premiums. The secondary function of insurance is to stimulate business growth, prevent losses, control losses, have social benefits and serve as savings. While the additional function of insurance is as an investment fund and invisible earnings.

What is the meaning of Risk?

Insurance or coverage is an agreement whereby an insurer binds himself to an insured person, by receiving a premium, for compensation to him due to a damage or loss of expected benefits which he may suffer due to an uncertain event. Another definition of insurance is a transfer of risk from the first party to another. In delegation, the rule of law and universal principles and teachings adhered to by the first party and other parties apply. From an economic perspective, insurance means a collection of funds that can be used to cover or compensate people who experience losses.

What is Risk?

The definition of ‘risk’ in insurance is “the uncertainty about the occurrence of an event that can cause economic loss”.

What are the forms of risk?

The forms of risk include pure risk, speculative risk, particular risk and fundamental risk.
Pure risk is the risk that results are of only two kinds: loss or break even, for example theft, accident or fire. Speculative risk is the risk that results in 3 kinds: loss, profit or break even, for example gambling. Particular risk is the risk that comes from the individual and the impact is local, for example a plane crash, car crash and ship aground. Meanwhile, the fundamental risk is the risk that does not come from individuals and has a wide impact, for example hurricanes, earthquakes and floods.

Are all risks insurable?

Not all risks can be insured. The risks that can be insured are: risk that can be measured in money, homogeneous risk (the same risk and is pretty much guaranteed by insurance), pure risk (this risk does not bring a return), particular risk (risk from individual sources), risk that occurs suddenly (accidental), insurable interest (the insured has an interest in the object insured) and risks that are not against the law.