Financial Education

Insurance

Pure Risk vs. Financial Risk

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Financial education

<img style="max-width: 100%; height: 305px; float: right;" src="https://static.vikaspedia.in/mediastorage/filestorage/20251102230251_Copilot_20251102_224849.png" alt="Uploaded Image" width="203">Risks are not only associated with Investments. There are risks like accidents, injury, illness and many other situations in our day to day life which can cause financial loss to us. These risks generally have low probability of happening in our life. However, if they do happen, financial loss can be severe.
While risks associated with Investments can lead to either loss or gain, there are no gains associated with risks like injury or illness. If it happens there is a financial loss, if it does not happen there are no gains for us. Such risks where we can face only loss and no gain are call Pure Risk.
PURE RISK-&nbsp; Risks which have only loss and no gain
Examples:
<ul>
<li style="text-align: left;">Floods</li>
<li style="text-align: left;">Terrorist attack</li>
<li style="text-align: left;">Car accident</li>
<li style="text-align: left;">Fire</li>
<li style="text-align: left;">Cancellation of flight due to fog</li>
</ul>
Managed through: INSURANCE
FINANCIAL RISK- Risks with either loss or gain Examples:
<ul>
<li style="text-align: left;">Stock investment</li>
<li style="text-align: left;">Corporate fixed deposits with low credit rating</li>
<li style="text-align: left;">Provident fund with no guarantee on future interest rate</li>
</ul>
Managed through: DIVERSIFICATION, AVERAGING, HEDGING

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