Finance and financial system

c)     How is the work of auditors monitored?

d)    Consider different aspects of professional auditors’ activities.

 

 

 


Insurance

Each of us runs risks every day. You can fall down the stairs going to school or work.

If you are doing business or are in business, you take a chance with financial loss. Losing money or property is an economic risk, but it is a risk all the same.

Economic risks are shared most effectively when many people are involved. Insurance divides a possible loss among large numbers of people. Each individual then pays a small fee for protection.

Sharing the cost among many people reduces financial loss. This "principle of large numbers" means many share a loss so one person suffers less. It is a basic concept of insurance. Insurance protects against all kinds of perils, or causes of loss. Examples of such perils are fire, shipwrecks, automobile accident, death, sickness, and dishonesty.

The purpose of insurance is to provide you with greater financial security. Insurance protection requires careful planning and decision making. Choosing the right insurance plan is an important task. Insurance companies provide almost any kind of that you might want. An insurance company sells the service of protection. The insurance company you work with is called the insurer.

When you and your agent have decided on a plan, the agent writes an application for you. The company then will issue a policy, a formal written agreement between you and the company. You are policyholder - the person who has bought insurance protection. The policy gives in detail all of your protection, costs, rights and responsibilities. The amount of money charged by the insurance company for protection during a certain period of time called a premium/ Part of the premium covers the cost of the services the agent and company give you. The company uses some of the premium to pay claims, or requests for payments due to financial losses.

Protecting yourself against the loss would be very expensive if it were not for sharing. There are two more major types of insurance companies. One, the stock insurance company, is a corporation with stockholders, a board of directors, and officers who run the company on a daily basis. The second major type is the mutual insurance company, a cooperative owned by its customers. Its owners are the people insured. Profits, called dividends, are distributed to the owners each year from investments made by the company. There are several types of insurance. Life insurance is a protection usually for the family and relatives of a person after death. Property insurance covers damages and losses to your own property. Liability insurance, on the other hand, covers damages or losses to someone else or to his or to her property that you may have caused accidentally. Health insurance provides money to pay bills in case of accident or sickness. Federal agencies also insure banks, saving and loan associations, and credit unions on their accounts. When a bank fails, tremendous amounts of money are involved. The federal government handles the social security program, which is income and retirement insurance plan.

Insurance frees you from some of the worry you would face without that protection.