TECHNIQUES OF RISK TRANSFER


  TECHNIQUES OF RISK TRANSFER
Insurance and reinsurance are generally types of financial protection which are accustomed to guard against the danger of losses. Losses are guarded against by transferring the danger to some other party through the payment of an insurance premium, being an incentive for bearing the risk. Insurance and reinsurance are similar in concept even though they are quite different to each other in terms of how they are used.
INSURANCE
Insurance is just a more commonly known concept that describes the act of guarding against risk. An insured is the party who'll seek to obtain an insurance policy whilst the insurer is the party that shares the danger for a paid price called an insurance premium. The insured can simply obtain an insurance policy for numerous risks. The most common kinds of insurance policy removed is just a vehicle/auto insurance policy as this is mandated by law in many countries. Other policies include home owner's insurance, renter's insurance, medical insurance, life insurance, liability insurance, etc.
The insured who removes car insurance will specify the losses against which he wishes to be insured.
This might include repairs to the car in the event of an accident, damages to the party who's injured, payment
for a hired vehicle until such time the insured's vehicle is fixed, etc. The insurance premium paid will
depend upon numerous factors including the insured's driving record, driver's age, any medical

Complications of the driver, etc. If the driver has received a reckless driving record he might be charged an increased premium since the possibility of loss is higher. On the other hand, if the driver has received no previous accidents then your premium will soon be lower because the possibility of loss is relatively low.
Reinsurance
Re insurance is when an insurance company will guard themselves against the danger of loss. Reinsurance in
simpler terms is the insurance that's removed by an insurance company. Since insurance companies
Provide protection against the danger of loss, insurance is just a very risky business, and it is essential that the
Insurance company has its own protection set up to prevent bankruptcy.
Through a reinsurance scheme, an insurance company is able to bring together or ‘pool ‘its insurance policies and then divide up the danger among numerous insurance providers in order that in the case a large loss occurs this is divided up throughout numerous firms, thereby saving usually the one insurance company from large losses.
Insurance vs Reinsurance
Insurance and reinsurance are similar in concept in that they're both tools that guard against large losses.
Insurance, on usually the one hand, is just a protection for the in-patient, whereas reinsurance is the protection removed by way of a large insurance firm to ensure that they survive large losses. The premium that's paid by a person will soon be received by the company that provides the insurance whereas the insurance premium paid for reinsurance will soon be divided among

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