Which of the following is an example of transfer risks
8) Which of the following is an example of risk transfer?A) Buying a car with air bagsB) Only crossing at the cornerC) Quitting smokingD) Purchasing auto liability insuranceAnswer: D Show 9) We buy life insurance in order to transfer Get answer to your question and much more 10) Increasing the deductible on your homeowner's policy is an example of Get answer to your question and much more 11) If you lower the probability of loss by taking preventive action you are engagingin which one of the following risk management strategies? Get answer to your question and much more 12) Quitting cigarette smoking and, thus, eliminating the cause of a loss is an example ofA) risk avoidance.B)risk reduction.C) risk retention.D) risk transfer.Answer: A Practice Quiz 10-1 (p. 341)What are the methods of managing risk? Get answer to your question and much more Discussion QuestionWhat is risk Management & summarizes various risks and appropriate strategies formanaging them. Get answer to your question and much more Risk reduction:You can reduce the risk of injury in an auto accident by wearing a seatbelt. Risk assumption:Risk assumption is the act of taking on responsibility for the loss orinjury that may result from a risk.Self-insuranceis the process of establishing a monetary fund that can be used tocover the cost of a loss.Risk shifting:The most common method of dealing with risk is to shift, or transfer, it toan insurance company or some other organization. TOPIC 7 : The insurance industry in MalaysiaMCQ1) Insurance companies collect premiums in advance of loss, and the funds collected arenot needed to pay immediate losses and expenses; these funds can be loaned to businesses.Because of this fact, insurance benefits society by Get answer to your question and much more 2) Apex Insurance Company wrote a large number of property insurance policies in an areawhere earthquake losses could occur. When the president of Apex was asked if she fearedthat a severe earthquake might put the company out of business, she responded, "Not achance. We transferred most of that risk to other insurance companies." An arrangement bywhich an insurer that initially writes insurance transfers to another insurer part or all of thepotential losses associated with such insurance is calledA) hedging. Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document What is Risk Transfer?
Risk transfer, in its true essence, is the transfer of the implications of risks from one party (individual or an organization) to another (third party or an insurance company). Such risks may or may not necessarily take place in the future. Transfer of wagers can be executed through buying an insurance policy, contractual agreements, etc. How does Risk Transfer Work?
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attribution linkArticle Link to be Hyperlinked Risk Transfer ExampleA buys car insurance for $5,000, which is valid only for the physical damage of the same, and this insurance is right up to 31st December 2019. A had a car accident on 20th November 2019. His car suffers from severe physical damage, and the repair cost of the same accounts for $5,050. A can claim a maximum of $5,000 from his insurance provider, and he will solely bear the rest cost. Types
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#2 – DerivativesIt can be defined as a financial product that attains its value from a financial assetFinancial assets are investment assets whose value derives from a contractual claim on what they represent. These are liquid assets because the economic resources or ownership can be converted into a valuable asset such as cash.read more or an interest rate. Firms mostly buy derivativesDerivatives in finance are financial instruments that derive their value from the value of the underlying asset. The underlying asset can be bonds, stocks, currency, commodities, etc. The four types of derivatives are - Option contracts, Future derivatives contracts, Swaps, Forward derivative contracts. read more to protect against financial risks like the currency exchange rate, etc. #3 – Contracts with an Indemnification ClauseIndividuals or organizations also use contracts with indemnification clauses for risk transfers. Contracts with such a clause ensure the transfer of financial risks from the indemnitee to the Indemnitor. In such an arrangement, the future economic losses shall be borne by the Indemnitor. #4 – OutsourcingOutsourcing is a type of risk transfer in which a process or project is outsourced to transfer various risks from one party to another. Importance
Different Ways to Transfer Risk#1 – Certificate of Insurance
#2 – Hold-Harmless ClauseThese are contracts with indemnity clauses between an Indemnitor and an indemnitee. This agreement must reflect critical information such as the responsibility of the Indemnitor against any loss, damage, or future contingencies towards the indemnitee, etc. It is also known as a save-harmless clause. Advantages
Disadvantages
Recommended ArticlesThis has been a guide to what Risk Transfer is & its definition. Here we discuss the types of risk transfer, how they work, and their importance, such as advantages and disadvantages. You can learn more about it from the following articles –
What is an example of transfer of risk?Risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. One example is the purchase of an insurance policy, by which a specified risk of loss is passed from the policyholder to the insurer.
What is meant by transfer of risk?What Is Transfer of Risk? A transfer of risk is a business agreement in which one party pays another to take responsibility for mitigating specific losses that may or may not occur. This is the underlying tenet of the insurance industry.
What is risk transfer in project management?Risk transfer is a risk reduction method that shifts the risk from the project to another party. The purchase of insurance on certain items is a risk-transfer method. The risk is transferred from the project to the insurance company.
How many ways risks can be transferred?Transfer of risk refers to a business agreement, where one party pays money to another party to mitigate specific losses that may or may not occur. This is the base of the insurance industry. Risks can be transferred between individuals, from individuals to insurance companies, or from insurers to reinsurers.
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