"Insurance does not remove risk, but it compensates for the loss resulting from the risk "Justify this statement.
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"Insurance does not remove risk, but it compensates for the loss resulting from the risk "Justify this statement.
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Insurance refers to a protection against the risk of loss & uncertainties. The concept of insurance is broadly divided into two types which clears the statement "Insurance compensates for the loss resulting from the risk.
The broadly divided two types of insurance are:
a) Life Insurance, b) General Insurance
Example: A Life Insurance protects the risk of loss of life of the insured.
2) In Fire Insurance, the percentage of loss is measured and then it will be compensated by the insurance company
3) In Marine Insurance, the protection is given to the goods carried in big ships through waterways against the uncertainties that many occur in voyage.
Thus, this clears the statement that Insurance does not remove risk as RISK CANNOT BE REMOVED BUT IT CAN BE AVOIDED just like Medicines does not cure a chronic disease but it prevents it.
Similarly, Insurance does not remove risk, but it compensates for the loss resulting from the risk.
"Insurance does not remove risk, but it compensates for the loss resulting from the risk " This statement can be justified as follows:
Explanation: Insurance refers to the contract where the insurance company agrees to indemnify the loss to the insured on the happening of any event in compensation of the amount known as insurance premium.
Statement:
The statement means that no one can avoid the mis-happening of any event be it the insurance company or the insured but the insurance company can compensate the insured by providing them monetary help in lieu of the insurance premium.
Example: No one can stop the death of a person but the insurance company can compensate the life's loss by providing monetary benefit to the family in lieu of the insurance premium paid under Life Insurance.
Learn more about Insurance:
Question: What is insurance? types of insurance?
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Question: Difference between life insurance and fire insurance and marine insurance
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