No one is exempt from risk; although the degree of risk exposure varies according to factors such as occupation, physical condition, geographical situation and attitude towards risks. Thus it is the fear of the consequences of risks and the awareness about the uncertainty of the future that has fuelled the fundamental human need for security and it is this desire for security that has prompted us to continually find ways of handling risk.

Although a great deal of study has been carried out by scholars on the definition of risk, there is no agreement as to the exact definition of risk. In our context we shall define risk as the UNCERTAINTY ABOUT LOSS. Loss, in turn, is the reduction or disappearance of value. Uncertainty over loss of life and limb, investment losses, theft of valuables, and losses due to motor accidents are only a few examples of such loss exposures.

One of the methods of handling risks is by TRANSFERRING THE RISK  - eg. INSURANCE.

Insurance is a mechanism whereby a large number of individuals group together and agree to contribute a certain fixed sum of money (called Premium) to a common fund. The money from the common fund is then used to pay for the losses that a few of the individuals may incur.