The document discusses the key differences between risk and peril, and defines various types of risks such as financial vs non-financial, quantifiable vs non-quantifiable, fundamental vs particular, pure vs speculative, and dynamic vs static risks. It also explains the differences between insurance, gambling, and wagering contracts. Insurance involves scientifically calculating risks and premiums based on probability, while gambling and wagers involve uncontrolled events with the goal of profit rather than risk sharing. Finally, it discusses the differences between insurance and assurance, noting that assurance guarantees payment on an event that is sure to happen, like death in a life insurance policy.

1. Sony Kuriakose
Assistant Professor
Newman College, Thodupuzha

2.  Peril is the immediate specific cause to
loss of value to an asset.
 Risk is the chance of loss or injury .It is
the possibility of loss due to
unpredictable happening in the future.
For example: Ships are exposed to the
peril of sea like sinking, piracy,
wreckage etc.

3.  Financial risk and non-financial risk:
 If a risk is concerned with financial loss, it is termed as
financial risk.
 If a risk does not involve financial loss, it is known as
non-financial risk.
 For example, the unexpected demise of an efficient
manager of a company will result in financial losses to
the company and hence there is financial risk from the
point of view of the company. At the same time, family
members of the manager have non-financial risk more
than the financial risk

4.  Quantifiable and non-
quantifiable:
 The risks which can be measured are known as
quantifiable risk
 Non-quantifiable risk cannot be measured. For
example:-Risks which leads to tension or loss
of peace etc

5.  Fundamental and particular risks:
 Particular risk can be confined to individuals or
smaller groups.. Example: - accidental death of
a person.
 Fundamental risks affect the whole society. its
origin and effects affect larger number of
people. Example:- Tsunami, flood, earthquake,
etc

6.  Pure risk and Speculative risks
 A pure risk is one which the loss occurs
by chance or not by choice. It involves no
loss or chances of loss.
 A speculative risk is one which the loss
occurs by choice of a person. There can
be loss or break even or profit.
 Pure risk can be insured but speculative
risks cannot be insured.

7.  Dynamic risk and static risks:
 Dynamic risks arise from changes in the economic, social,
technological or political environment. They are difficult to
predict.
Example: 1) Change in the economic policies
 2) Total ban of tobacco may be heavy risk for a
cigarette manufacturing industry.
 Static risks are there occurring even if there is no change in the
macro environment. They are more or less predictable.
 Example: Possibility of decline in sale of a cigarette company due
to competition.
 Dynamic risks static risks resemble speculative and pure risks
respectively.

8.  A wager is an agreement between 2 parties by
which one promises to pay money or money’s worth
on the happening of some uncertain event in
consideration of the other parties’ promise to pay if
the event does not happen
 E.g.: If X and Y enter into an agreement that X shall
pay Y Rs. 1,000 if India wins a cricket match and that
X shall pay Y Rs. 1,000 if India loses the
 Features?
 Promise to pay money or moneys worth, promise must
be conditional on event happening or not happening,
Both parties should not have control over the
happening one way or other, Parties don’t have any
other interest in the event except money.

9.  Insurable interest- Owner of the policy
 Valid Vs Void
 Insurance- Interested in the non happening of the
event insured
 All insurance contracts are contract of indemnity
(except life)- No question of indemnification
 Gambling Vs scientific calculation of risk and
premium based probability theory and actuarial
principles
 Useful to society – Not useful

10.  Win- win situation is possible in insurance
 Valid Vs Void
 Risk sharing and risk creation
 Loss or no loss, loss-break even- profit
 Gambling Vs scientific calculation of risk and
premium based probability theory and actuarial
principles
 Premium, gambler enjoys risk and doesn’t want to
share it.
 Only one common factor?

11.  Often used interchangeably and treated as
synonyms, but the meaning and dimension of these
2 concepts are different.
 Assurance is used in those contracts which
guarantee the payment of a certain sum of money
on the happening of a event that is sure to happen
sooner or later.
 Eg: Life insurance policies- Life assurance policies.
 Differences?
 Non-life Vs Life, Loss due to risk and the time,
subject matter, One year- long term contract,
Indemnity, surrender, protection- protection cum
investment.