Definition Of Risk
Risk is a part of human life and starts with life and continues till death.
Risk refers to hazard, peril, chance of loss or injury. It implies the degree of probability of any type of loss. The risks human face include death, accidents, fire, and business losses.
Major risks cannot be fully eliminated or cannot be averted by individuals or individual corporations, but can be checked by shifting them to specialized groups known as insurance companies. The leading principle underlying insurance is pooling of funds collected from a large number of people as premium out of which losses are made up for individual’s losses. This underlying principle is referred to as law of averages or law of large numbers. The law suggests that thousand of people or organizations are insured but only a few meet the grief. This phenomenon make possible the insurance business.
By insurance certain types o risks can be covered including fire, property damages, burglary, accidents. Marine insurance is another branch of insurance which is concerned with ships and their cargoes. It is undertaken by underwriters and general insurance companies. Still another i _ branch is life assurance. It is of two types: (i) Endowment, and (ii) whole life assurance. In endowment policy is issued for a fixed period of time.
Whole life assurance calls, on the other hand, for the payment of premium up until death. The insurance requires a person or a group of persons to pay a sum of money to another under the contract that in certain circumstances the second party will compensate for the loss suffered by the first.
No risk no profit, as the popular saying goes. Business activities involve risks. Element of risk is present more strongly in new businesses than the old-established ones. Risk refers to chance of loss, injury or damage. It may be divided into the following categories:
1. Business risks
2. Kinds of risk by insurance
• Insurable risks
• Uninsurable risks