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Understanding Insurance: Managing Risks in Business

Learn about the meaning of risk, the definition of insurance, and the importance of insurance in protecting wealth, ensuring economic growth, and providing security. Discover how insurance reduces uncertainty, encourages savings, and enhances business efficiency.

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Understanding Insurance: Managing Risks in Business

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  1. INTRODUCTION We are exposed to many risks in our day to day life. Nobody can predict what may happen in the next moment. There may be an accident, calamity, theft, loss due to certain other cause etc. Similarly, there are always risks in business. Everybody feels like shifting the risk to some agency which can compensate in case of loss or damage. MEANING OF RISK: Risk is expressed differently by people. To some, it is the chance or possibility of loss, to others, it may be uncertain situations. The word ‘risk’ has been defined as follows: “Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for”.

  2. DEFINITION OF INSURANCE • CONTRACTUAL DEFINITION: In the words of E.W. Patterson, “Insurance is a contract by whichg one party, for a consideration, called premium, assumes a particualr risk of the other party and promises to pay to him or his nominee a certain or ascertainable sum of amount on a specified contingency.”

  3. IMPORTANT TERMS USED IN INSURANCE

  4. CHARACTERISTICS OF INSURANCE

  5. ASSURANCE AND INSURANCE

  6. Wealth of the society is protected Economic growth of the country Reduction in inflation Insurance provides security, safety Insurance affords peace of mind Insurance protects mortgaged property Insurance eliminates dependency It encourages savings Profitable investment It fulfils needs of person Uncertainty of business losses is reduced Business efficiency is increased Keyman indemnification Enhancement of credit Business continuation Welfare of employees

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