Which of the following is not a function of insurance?
(a) Risk sharing
(b) Assist in capital formation
(c) Lending of funds
(d) None of these
Which of the following is not a function of insurance?
(a) Risk sharing
(b) Assist in capital formation
(c) Lending of funds
(d) None of these
Insurance is a contractual policy through which an individual gets financial protection by spreading the risks or losses that may be caused by the occurrence of unpredictable events. It gives individuals an assurance that a certain sum of money will be given to them in case of any damage to the insured goods. In return for this assurance, the insured makes a regular payment (monthly, quarterly or yearly) to the insurer, which is termed premium. Thus, insurance helps in pooling financial resources and assists in capital formation.
Insurance does not involve lending of funds; lending is a function of commercial banks. Insurance is also not risk sharing, as the risk associated with the occurrence of unpredictable events is not shared, but rather spread out.
Hence, the correct answer is option (b).
Insurance is a contractual policy through which an individual gets financial protection by spreading the risks or losses that may be caused by the occurrence of unpredictable events. It gives individuals an assurance that a certain sum of money will be given to them in case of any damage to the insured goods. In return for this assurance, the insured makes a regular payment (monthly, quarterly or yearly) to the insurer, which is termed premium. Thus, insurance helps in pooling financial resources and assists in capital formation.
Insurance does not involve lending of funds; lending is a function of commercial banks. Insurance is also not risk sharing, as the risk associated with the occurrence of unpredictable events is not shared, but rather spread out.
Hence, the correct answer is option (b).
