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Perhaps the most common method of dealing with risk is to shift, or 1)______,the risk to an insurance company .An insurer (or insurance company) is a firm that agrees, for a fee, to assume 2)______ responsibility for losses that may result from a specific risk.
The fee 3)______ by an insurance company is called a premium. A contract between an insurer and the person or firm whose risk is assumed is known as an insurance 4)______.Generally, an insurance policy is written for a period of one year. Then ,if both parties are willing ,it is 5)______ each year .It specifies exactly which risks are covered by the agreement, the dollar amounts the insurer will pay in case of a 6)______,and the amount of the premium.
Insurance is thus the 7)______ against loss that the purchase of an insurance policy affords .Insurance companies will not ,however, assume every kind of risk .A risk that insurance companies will assume is called an 8)______ risk. A risk that insurance companies will not assume is called an uninsurable risk.
In general ,pure risks are insurable ,whereas 9)______ risks are uninsurable. An insurance company will protect a Ford Motor Company assembly plant against losses due to fire or hurricanes .It will not ,however, protect Ford against losses resulting from a lack of sales 10)______ for automobiles.
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