There is a common saying that insurance is full of risks. However, insurance is essential to cover the people as well as organizations against unforeseen events that can cause potential harm. That is why people opt for insurance. However, there are different types of insurance. So to get better details of most suitable insurance and risks associated with it, individuals, as well as companies, consult insurance managers/ advisors.
Most companies take insurance seriously. As per reports, Starbucks pays a hefty sum on the insurance of employees than it invests in coffee. Clearly, there is a great scope for such professionals. If you have a keen interest in the sector and you wish to make your career in it, then you can pursue a course in insurance and risk management. MIT School of Distance Education (MIT-SDE) offers an 18-month Post Graduate Diploma in Management (PGDM) course in Insurance and Risk Management. You can pursue this course to acquire the necessary skills and knowledge to enter the industry.
What is insurance and why it is important?
Insurance is a contract or agreement by which an individual or an entity gets a guaranteed compensation for specified loss, damage, illness, or death in return for the payment of a specified premium by an insurance company.
An insurance policy is a kind of legal contract which states conditions and circumstances under which the insurer will compensate the insured for its loss. As tempting as it may sound to have a backup as insurance, this comes with potential risks.
Risks in insurance
. These are various types of risks in insurance:
1. Financial and Non Financial risk
Financial risk includes those risks whose outcomes can be measured in monetary terms. In this type of risk, loss of a person/thing is compensated by paying money to the person after proper assessment of loss. Eg: Damage or stealing of a property like a motorcycle, car, machinery, cash etc.
On the other hand, non-financial loses are those that cannot be measured in monetary terms.
2. Pure risk and speculative risk
Pure risk is an accidental risk that results in the physical loss of the insured. The probability of the occurrence of physical risk is very high. These risks can be the result of human negligence, natural disaster, communal riots, strikes at the workplace, sudden breakdown in a manufacturing unit, fall of the country, etc. In pure risk, the outcome will be either be a loss or no loss, there is no gain in pure risk. The outcome is never favorable for the insured. Eg: loss in business due to damage to resources.
Speculative risk works on speculations. The cause of these risks is mere speculation. The goal of these risks is to make a profit. In speculative risk, there is a possibility for the insured to get profit however loss can also occur. These types of risks involve investing in a share market, setting up a new business, etc.
3. Fundamental risk and Particular risk
Fundamental risks are the risks that are dependent on nature. These are the risk arises from natural calamities and can’t be controlled by any individual or group. The loss caused by such factors is unpredictable; it can be either a huge loss of money and lives or it can cause small loss.
Eg: Flood, earthquake, etc
Particular risks are the risks that are caused by a group of people and are not natural. It includes causes like communal riots, terror attacks, etc which are not created and controlled by nature.
If you wish to learn the management of these risks, you can join MIT-SDE right away!