Page 22 - MODULE1_Insurance Introduction_CHA

Example:

- Vehicle, house, computer (material asset)

- Life, Health (non-material asset)

Risk
‘Risk’ is a term that we use to evaluate the chance of suffering

a loss as a result of uncertain events like accidents, illness, fire

etc.

Risk can be defined in several different ways

1. The probability of something happening, multiplied by the

resulting cost or benefit if it does.

2. The probability or threat of quantifiable damage, injury,

liability, loss, or any other negative occurrence that is caused by

external or internal vulnerabilities and one, which may be

avoided through pre-emptive action.

Hence, risk is the potential of loss (an undesirable outcome,

however not necessarily so) resulting from a given action,

activity and/or inaction. The notion implies that a choice having

an influence on the outcome sometimes exists (or existed).

Potential losses themselves may also be called "risks". Any and

every human endeavor carries some risk, but some endeavors

are much riskier than others and those are worth insuring.

22