MANAGEMENT

Detailed explanation-1: -The basic principle of insurance is that an entity will choose to spend small periodic amounts of money against a possibility of a huge unexpected loss. Basically, all the policyholder pool their risks together. Any loss that they suffer will be paid out of their premiums which they pay.

Detailed explanation-2: -Insurance offers support to the policyholder and helps to reduce the uncertainties in the business or in human lives. With the help of a policy, the insured party is protected against future hazards, vulnerabilities and accidents.

Detailed explanation-3: -Mechanism (4) is based on the assumption that holding a supplementary insurance contract might be correlated with being a ‘good risk’ vis-à-vis basic insurance, i.e., having a lower probability of consumption in basic insurance for a given illness.

Detailed explanation-4: -Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you. If you have no insurance and an accident happens, you may be responsible for all related costs.