Question

Mr. Mahesh is a software engineer. He has taken a term insurance for Rs. 3000000/- for 30years. This is an example for

Answer 1

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.

Answer 2

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.