Role Of Insurance In Risk Management
Welcome to the perspective of role Of Insurance In Risk Management. It protect from the risk of person and businesses. Insurance has become an essential tool to manage the risk of an individual and corporations.
Insurance is an economic institution that allows the transfer of Financial risk from an individual to a group by the means of two party contract. Let’s quickly take a rundown on the role of insurance in risk management.
Risk Management Involves five basic steps which includes:
- Identification Risk:- identify the risk, the trick here is to put the risk in dollars. In the case of life insurance, for instance, lay out the expected income that will be lost of the insured were to die. Rules of thumb are handy, but there is no substitute for laying out the cash flow.
- Assessment Risk:- After identifying risks, you need to evaluate them based on how frequently they may occur and how severe the potential injury or damage might be.
- Decision making about how to control or manage risk:- determine how much you can bear, this steps is the one that is the source of must of the mistakes you spend too much money if you take too little risk, and you can lose big if you take too much risk. The premium you pay for an insurable risk has to cover not only the expected loss, but also the adminstrative expenses incurred by the insurance company.
- Implementing those control
- Supervising the implementation of the plan .
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Here are the role of insurance in risk management
- Its purpose is to protect a person from losses due to damage, theft and liability. It includes basic coverage, special form, renter, comprehensive, and condominium owner. There are disadvantages of under-insuring and over- insuring. The insured must pay a deductible toward a loss before the insurance company contributes. Policies with lower deductibles have higher premiums, and vice versa. Replacement value – the dollar amount needed to replace the personal property
- Basic health insurance covers doctor visits, routine service, and hospital and surgical expenses. Major medical insurance insures a person from large and catastrophic expenses resulting from illness or injury. Dental and vision care insurance are generally sold separately from basic insurance coverage. Disability insurance offers workers protection in case of job- related injury. Long term care insurance offers coverage for nursing home and assisted living facilities Co-pays (i.e., payment by the insured for medical services) are a requirement of most health insurance plans. Annual deductible – the yearly amount you may be responsible to pay.
- Professional liability insurance is often purchased by attorneys, health care providers, and educators to protect against malpractice and other litigation. Umbrella liability insurance provides additional protection should other policies not be sufficient.
- Insurance can play an important role in financial planning.
- Protection against risk of financial loss. Assistance for individuals and families preparing financially for risks such as disability, unemployment, long-term care, and death. Provision for retirement income Accumulation of savings (for family expenses) Provision of cash value that can be borrowed. It is important to make periodic reviews of insurance coverage.
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