Which of the following is not a of insurance?Risk sharingAssist in capital formationLending of fundsNone of the above (2024)

FAQs

Which of the following is not a of insurance?Risk sharingAssist in capital formationLending of fundsNone of the above? ›

Lending of funds is not a function of insurance.

Key Takeaways

An uninsurable risk could include a situation in which insurance is against the law, such as coverage for criminal penalties. An uninsurable risk can be an event that's too likely to occur, such as a hurricane or flood, in an area where those disasters are frequent.

The two most common risk sharing examples are insurance policies and indemnification clauses in contracts. Insurance policies are the most common risk sharing strategy. A company or individual will purchase an insurance policy from the insurance company that ensures coverage of unexpected loss.

4) The insurance premium paid, are invested by the insurer in various income generating assets which assists in capital formation.

The contract of indemnity is defined as, " A contract where one party promises to save the other from the loss caused by the conduct of the promisor himself or by the conduct of any other party." In a life insurance contract, nobody can save the life of the person. Hence, contract of indemnity does not apply here.

The functions of insurance are risk sharing, assisting in capital formation, economic progress, etc. Lending of funds is not a function of insurance.

A risk that an insurer will not take on. For example, this may be where an event is inevitable (such as a terminally-ill person's death), gradual (such as rust or corrosion) or against the law.

The insurance option that would be considered a risk-sharing arrangement is the Mutual option. A mutual insurance company is owned by its policyholders, who share in the profits and losses of the company. Policyholders contribute premiums to the company, and in return, the company provides coverage and pays claims.

Another example is insurance, wherein, the buyer of insurance transfers its risk to an insurance company. Risk Sharing is an entirely different concept. It involves sharing (dividing) common risk among two or more persons.

Financial Risk Sharing: Financial risk sharing typically involves investment and loan agreements that distribute financial risk amongst different parties. Examples include syndicated loans, risk sharing in the derivatives market (using tools like credit default swaps), securitisation, and public-private partnerships.

What is an example of capital formation? ›

There are three kinds of Capital Formation: Gross Fixed Capital Formation (acquiring buildings and machinery to produce more goods), Changes in Stocks (storing up goods for sale at a later date), and acquisition of Valuables (such as gems, antiques and works of art).

Dying too early cannot be categorised under risk.

Capital formation creates employment as two stages. First, when the capital is produced, some workers have to be employed to make capital like machinery, factories, dams, irrigation works, etc. Secondly, more men have to be employed when capital has to be used for producing further goods.

Lending funds is not a function of insurance.

Final answer: Among the provided options, the Certificate of Authority is not a part of an insurance contract. It refers to a document given to an insurance company to permit them to operate within a specific state. The Application, Policy, and Riders however, are all integral parts of an insurance contract.

Which of the following is NOT an essential element of an insurance contract? In order for insurance contracts to be legally binding, they must have four essential elements: agreement (offer and acceptance), consideration, competent parties, and legal purpose. Counteroffer is not required.

An uninsurable risk is a risk that insurance companies cannot insure (or are reluctant to insure) no matter how much you pay. Common uninsurable risks include: reputational risk, regulatory risk, trade secret risk, political risk, and pandemic risk.

Risks that would adversely affect large numbers of people or large amounts of property - wars or floods, for example - are typically not insurable.

Insurable risks are risks that insurance companies will cover. These include a wide range of losses, including those from fire, theft, or lawsuits. When you buy commercial insurance, you pay premiums to your insurance company. In return, the company agrees to pay you in the event you suffer a covered loss.

The most common types of perils excluded from "all risks" include earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, nuclear hazard, and market loss.