Page 26 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 2: Risk and Insurance

Personal Risks Notes

Remember, there are four basic types of risks, which a person faces. A person may or may not
have any property or assets but he has to manage the below mentioned risks, and hence, there
is a vast market for insuring such risks like:
Premature death (Dying too early),
Dependent old age (Dying too late),
Sickness or disability (Resulting in loss of income and earning power, involving additional
expenses and extra needs), and
Unemployment (Loss of income may be temporary/permanent, but routine living expenses
continue. Fixed liabilities like loan repayments have still to be paid, hence, further
multiplying the difficulties).

Property Risks

Direct and consequential losses (arising from usage of various kinds of property), which may
take different forms:

Loss/damage to property,
Loss of use of property, and
Additional expenses occasioned by the loss of property.

Liability Risks

They arise out of human mistakes often termed as civil wrongs committed by a person resulting
in injury and/or death to another person, and/or loss of or damage to property. In either case,
he attracts liability for damages by way of compensation under common law, statutory law or
both.

Risk Arising from Failure on Part of Others

Risk arising due to failure on part of another person to meet a specified obligation, e.g. guarantee
bonds and sureties.

Fidelity Risks

Risks arising due to dishonesty of employees and others in course of performance of their duties
causing loss of money and stocks to the owner.

Risks Due to Ownership and use of Transport Vehicle

Use of transport vehicles opens scope for two types of risks – own damage or loss to the vehicle
due to a variety of pure risks including negligence. The second risk is death/injury to third
parties and loss/damage to their property.

Production Risks

A firm may fail to produce its decided output at the desired and planned unit cost due to
uncertain event(s). Production may be disturbed or stopped by, for example:
Fire, flood, or strikes.

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