St.

Mary’s university
Department of Accounting and Finance
Risk Management and Insurance
Individual Assignment

Name-BETHELHEM KIFLU

Section- U

Id- Rad/2895/2010

Summited to-Mr Mohammed Seid

June 2020
1)Insurance

Definition: Protection against loss for which you pay a certain sum
periodically in exchange for a guarantee that you'll be compensated
under stipulated conditions for any specified loss by fire, accident,
death, etc

A contract whereby, for specified consideration, one party undertakes

to compensate the other for a loss relating to a particular subject as a
result of the occurrence of designated hazards.

The normal activities of daily life carry the risk of enormous financial
loss. Many persons are willing to pay a small amount for protection
against certain risks because that protection provides valuable peace of
mind. The term insurance describes any measure taken for protection
against risks. When insurance takes the form of a contract in an
insurance policy, it is subject to requirements in statutes,
Administrative Agency regulations, and court decisions.

One of the smartest moves any business owner can make is having
enough of the right kinds of insurance. Not only does this protect your
business's assets from risks that could very well reduce them to nothing
if a catastrophe struck, it also safeguards your personal assets, which
are often on the line, from a liability point of view.

What kind of risks should you be concerned about? If you have

employees, you're obligated to:

• Provide a safe place to work,

• Employ individuals reasonably competent to carry out

• Warn employees of danger,

• Furnish appropriate and safe tools, and

• Set up and enforce proper rules of employee conduct as they relate

to safe working procedures.

You also owe a degree of safety and concern to your customers, clients,
and the public--not only for their physical well-being when they're
doing business with you but also to protect their property.

2)The Five Basic Principles Of Insurance

1. Insurable Interset: Importance For Insurance right

If you want to ask the insurance, you must have a relationship or

interest for insurance between you andits designees. Generally its
designees will feel a
loss ifthe dipertanggungkan event occurs. Insuring your
example and not the party that is a partner. If it comes to happen
one thing, your partner will experiencelosses.

Another example is life insurance among the banks with the KPR. If it

comes to happen one thing with theMORTGAGE, then the insurance
company will pay the deficiency liability the KPR.

An example of the benefit for insured (Insurable Interest):

Family relationships, such as husband, wife, child, mother, father.

Business relationship, such as a creditor with the debtor, company
with important people in the company.

2. the Utmost Good Faith: in good faith

Any agreement should be grounded with the goodwillbetween the two

sides, including in the insuranceagreement. Insurance companies
will accept the transfer of the risk with the principles of goodwill, for
example, we give the data are true and honest, and does not cover
the facts of health at the time of fillingthe form letter filing life
insurance. Some cases the insurance company canceled
the agreement, because the find health facts that are not in accordance
with the statements of his client. Make not good allowsalso the
insurance company did not pay the sum assured. The insurance
company generally menulisangoodwill on policy and
explained orally by life insurance agents.

3. the Law Of Large Numbers: the law of large numbers

The law of large numbers (law of large number) is the principle

of statistics and probability theory that States the greater number
of samples are used froman event, then the results of the radar might
begetting closer to the average population. Simply putin the
insurance world is: the more people who join the insurance, then
chances are the magnitude of theloss will be close to the
estimated losses.

Based on the theory of the law of large numbers (lawor large number),

then the insurance companiesformed two tiers:

The level of Mortality that is the frequency or the number of the death

toll.
The rate of Morbidity that is the frequency or the number of levels
of pain, injuries, the occurrence ofdefects and other events that
are insured.

The level of mortality and morbidita be one basis

fordetermining insurance premiums.

4. Indemnity: principles Idemnity

The insurance company will indemnify according to the amount of the

losses we have experienced. For example, the insurance
company will pay or reimbursethe cost of hospital in accordance
with hospital bills.This principle is basically serves to avoid participants
who have the intention to benefit from the onset
of afinancial loss on the health insurance program.

5. Subrogation: transfer of Rights Principle

The insurance company will transfer the rights to aparty that has been

designated by its clients in the event of a loss. The insurance
company will transfer the rights to a third party are harmed. The
principle oftransfer of rights (subrogatio) is generally applied to
the insurance company losses.

3)A good life insurance policy can provide us with peace of mind and
your family with the financial assistance they will need later. Before
taking out a life insurance policy, it’s important to understand the
principal types of life insurance and how you can benefit from them.

When it comes to purchasing life insurance policies, it’s important to

understand the two types-  term and whole life. Also known as
permanent life insurance, whole life can cover a wide range of
categories including traditional whole life, universal life, variable
universal life, and variable life. Whole life insurance can offer benefits
over time while term can be useful if your budget requires you to pay a
smaller premium.

Traditional Whole Life

Traditional life insurance is the most common form of whole life

insurance. It provides you with coverage for your entire life, and your
beneficiaries are guaranteed to receive a set amount in the event of
your death. With a premium that remains the same amount, traditional
whole life insurance plans allow you to build up cash value, that you
can borrow from if needed.

Universal Life

Universal life insurance is a policy that is flexible and offers low-cost

protection similar to a term life plan. It also includes a savings or cash
value element. This type of policy is often a good investment for young
adults, or individuals who need a lower priced premium for their whole
life plan.

Variable Universal Life

Variable Universal life insurance is another policy that has a cash value
option. The difference with this type of policy is that it can have sub-
accounts that work similar to mutual funds. These accounts can provide
exposure to stocks and may offer an increased return that one couldn’t
receive from a traditional whole life policy.
4)A limit is one of the most important concepts to understand when
you're considering an insurance policy. An insurance coverage limit
determines the maximum amount of money an insurance company will
pay for a covered claim.Limit of Insurance — the most that will be paid
by the insurer in the event of a covered loss under an insurance
policy.This confirmation addresses the inherent limitation of insurance
claims databases where the administrative purpose of a claim may
result in a lack of correspondence between the claim and the
underlying clinical condition.A limitation of the insurance claims data is
that socioeconomic and quality of life measures, such as work
absenteeism, which would be of considerable importance to an analysis
of people with multiple comorbidities, are not obtainable.In addition,
because of the inherent limitations of insurance data, some lifestyle
risks, such as the use of ground-surface water, cannot be evaluated.

5)

1)Protects society’s wealth

Through various types of insurance schemes, the insurer protects the

wealth of the society. Life insurance offers protection against loss of
human wealth. General insurance policies protect the property against
losses due to fire, theft, accident, earthquake, etc. As such, both
general and life insurances offer protection to stabilize business
condition and financial position.

2)Social security benefits

Insurance plays a pivotal role in fulfilling certain needs for which state
might have to provide. The provision for old age, sickness and disability
of persons in general. Those who have their insurance do not become a
burden on state insurance plan.

In case of fire, explosions and other calamities that would tend to

impoverish (render poor) families would have been relieved of the
financial loss if adequate insurance had been maintained.