ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Chance of loss is closely related to the concept of risk. Chance of loss is defined as the probability that an event will occur. Like risk, probability has both objective and subjective aspects.

Detailed explanation-2: -Possessory Risk of Loss: This type of risk exists when there is a possibility that you may not have possession of the goods. For example, if you lend your car to someone and they get into an accident, the possessory risk of loss would be the financial loss you incur from not having use of your car.

Detailed explanation-3: -"Risk is the chance of loss.” Albert H. Mow-bray, Insurance (1st ed.; New York: McGraw-Hill Book Company, Inc., 1930), p. 3.

Detailed explanation-4: -Chance of Loss distinguished from Objective Risk◦Chance of Loss – Probability event that causes loss will occur. ◦Objective Risk – Relative variation of actual loss from expected loss. **The chance of loss may be identical for 2 groups but objective risk may be quite different.

Detailed explanation-5: -This chance of loss is called as risk. The cause of the risk event is known as peril.