In business planning, risk management is undertaken to identify certain risks and take steps to eliminate exposure to loss. Insurance is a form of risk management, used to protect the insured against the risk of loss. In an insurance contract, the risk of loss is transferred from one entity to another. The insurance company selling the insurance is known as the insurer, while the policyholder that buys the insurance policy is known as the insured.
The insurance rate is used to determine the amount to be charged for a certain type of insurance coverage or premium. Under the contract or insurance policy, the insured is to make a small payment to the insurance company in exchange for a guarantee of compensation in case the insured suffers a certain loss. Business insurance operates by pooling funds from various entities to pay for the losses some may incur.
A risk needs to meet certain characteristics to be considered insurable.
For example, a risk is considered insurable if the insurer is able to charge a premium high enough to cover not only claims expenses, but also to cover the insurer?s expenses. The risk cannot be so catastrophic that the premium payments would be too high, making it not feasible for the insurer to cover the loss.
All businesses need to ensure against risks such as fires, natural disasters, theft, legal liability, automobile accidents, and the disability or death of employees. Business insurance can protect start up or medium-sized businesses from insurable risks by reducing uncertainties under which they operate.
Business managers should contact insurance companies in Chicago to find out more about their insurance policies.
Loss can be identified by insurance companies Chicago IL residents trust, and each category of loss can be managed by a corresponding type of insurance. Property loss includes burglary, damage that can result from the illegal activities of employees (such as fraud, and forgery), and physical damages (such as fires and vandalism). Business managers need to work with their insurance providers in identifying the most likely sources of loss.
Another frequent risk identified by insurance companies in Chicago is legal liability. Legal liability can be divided into two sectors: general liability and product liability. General liability covers business-related injuries to employees and other people on company premises that may be attributed to negligence. Product liability covers risks associated with defective merchandise or poor service.
Source: http://www.haz-split.org/business-insurance/risk-management-and-business-insurance.html
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