MANAGEMENT

Detailed explanation-1: -The three major insurable risks are pure, economic, and speculative. The amount of money payable to a policyholder upon discontinuation of a life insurance policy is called the face amount. Essentially, insurance is a way to enrich policyholders. Insurers cannot predict which specific individuals will suffer losses.

Detailed explanation-2: -Insurable Types of Risk There are generally 3 types of risk that can be covered by insurance: personal risk, property risk, and liability risk.

Detailed explanation-3: -Pure risks can be divided into three different categories: personal, property, and liability. There are four ways to mitigate pure risk: reduction, avoidance, acceptance, and transference. The most common method of dealing with pure risk is to transfer it to an insurance company by purchasing an insurance policy.

Detailed explanation-4: -Pure Risk Versus Speculative Risk As mentioned earlier, insurance companies generally only insure against pure risks, also known as event risks. This includes any uncertain situation where the prospect of a loss exists but no opportunity for financial gain is present.

Detailed explanation-5: -Only pure risks are insurable because they involve only the chance of loss. They are pure in the sense that they do not mix both profits and losses. Insurance is concerned with the economic problems created by pure risks. Speculative risks are not insurable.