©RAHUL MAHATO

TECHNO INDIA KOLKATA

COLLEGE CODE – 226

ASSIGNMENT FOR CA – 2

SUBJECT CODE - 602

SUBJECT NAME – HEALTH INSURANCE

DEPARTMENT – BBA IN HOSPITAL MANAGEMENT

NAME – RAHUL MAHATO

ROLL NO – 22603320030

SESSION – 2020-2023

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 “Insurance as a tool to manage risk” Explain?

Ans - Insurance is a tool that can be used to manage risk. It works by

transferring the financial burden of a potential loss from the insured party to
the insurer. Insurance companies provide coverage to their customers in
exchange for a premium, which is a payment made by the insured to the
insurer. This premium helps cover any potential losses that the insured party
may incur due to an unforeseen event. By paying this premium, the insured is
effectively transferring the risk of a potential loss to the insurer. If a loss does
occur, the insurer will pay out a predetermined sum to the insured in order to
compensate for the loss. Insurance can help to reduce the financial burden of a
potential loss and can provide peace of mind for those who are worried about
the potential risks associated with their activities. In simple terms, risk refers to
identifying and controlling the risks surrounding your decisions and actions—
whether they are risks associated with your assets or health. A highly preferred
tool to minimize risk is life insurance. The primary purpose of insurance is to
reduce the risks an insured person faces.

How does Insurance reduce risk?

The first inherent is the risk of life - As life is uncertain. However, you need not
worry about finance while dealing with these risks. With a solid life insurance
policy, you can live a stress-free life. You can also choose a suitable health
insurance policy that safeguards you and your family in case of medical
requirements. This way, insurance provides an additional layer of financial
security.

The second is the risk of health - Good health is key to a happy life. The COVID-
19 pandemic has demonstrated the importance of good health as well as health
insurance policy. A suitable health insurance policy will assist you in dealing
with any health emergencies and medical treatments in the family and it will
serve to adequately cover all medical costs.

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Some of the points that insurance manage risk are -:

i. Secure family’s future - If you are the sole earning member of your family,
the first thing you should do is to save responsibly, identify your long term
financial goals and buy life insurance cover that helps to safeguard your
family’s needs. Consider the difficulties your family would face in your
absence. The life insurance plan you invest in will ensure their financial well-
being and support them through difficult situations.
ii. Fulfilling financial goals - Everyone has financial goals. What matters is the
effort you are ready to make to achieve those goals. A series of small steps in
the right direction can help you achieve your goals such as tracking inflation-
related trends, investing wisely after assessing your goals and spending
carefully. If your goal includes planning your retirement and generating a
source of passive income, life insurance is the financial tool you need for
retirement planning. Thus, you will not be forced to rely on others, and you
can live independently in later years.
iii. Encourages savings and investments - Disciplined saving is key to financial
planning. For those interested in exploring investment options, consider Unit
Linked Insurance Plans. ULIPs offer the dual benefits of insurance and
investment. One of the key features of ULIPs is they are market-linked
instruments, and therefore, give returns in line with the market while
minimizing risks. They effectively promote and ensure risk management.
iv. Provides protection - The plan provides a life cover along with added benefit
of wealth creation.
v. Flexible - It offers the flexibility to meet unexpected expenses by allowing
you to partially withdraw some money 5 years after buying the policy.
vi. Systematic investment tools - The plan promotes the habit of saving
systematically over a long term through monthly/annual payment modes.
vii. Gives you control - The plan gives you the option of switching funds so that
you are always in complete control on your investments.

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