What is insurance?give its economic value.?

Answer 1

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium and duty of care.

Answer 2

Here is an example of how insurance provides economic value. Lets take the eastcoast shoreline or brush areas in California. Because of potential hurricane and fire threat developers need insurance to protect their assets. There would be no substantial business or homeowner investment if developers had no way to recoup their investment after a loss. This is the reason the state and federal government developes or underwrites insurance plans ( Fair Plan, Flood Insurance) for for high risk regions of the country when private companies refuse.

Answer 3

Insurance is paying a company for accepting certain risks for protecting something against financial loss. Car insurance for example, one risk could be theft, financial loss or economic value to insured is cost to replace car. Another example, home insurance, one risk is fire, financial loss to insured is cost of reinstating to condition of home before the fire. For life insurance, how would you define the economic value? (Just to test yr understanding :)

Answer 4

Insurance is about risk, and how a person feels about risk.

in economics we are talking utility.

people who use insurance would get same or more utility getting less in return if they knew they would be protected, than facing an all or nothing situation

Answer 5

Insurance = Investment