Mr. Mahesh is a software engineer. He has taken a term insurance for Rs. 3000000/- for 30years. This is an example for
Answers
Answer: Risk Transfer
Explanation:
Risk transfer is most often accomplished through an insurance
policy.
This is a voluntary arrangement between two parties, the
insurance company and the policyholder, where the insurance
company assumes strictly defined financial risks from the
policyholder.
In very simple terms, if a worker is injured, the
insurance company pays the cost.
If a building burns down, the
insurance company pays to replace it.
Insurance companies charge a fee, or an insurance premium, for accepting this risk.
In addition, there are deductibles, reserves, reinsurance and other financial agreements that modify the financial risk the insurance company assumes.
Mr. Mahesh is a software engineer. He has taken a term insurance for Rs. 3000000/- for 30years.
This is an example for risk transfer. Risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another.
One example is the purchase of an insurance policy, by which a specified risk of loss is passed from the policyholder to the insurer.