ECONOMICS
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Risk of loss is shared with the insurance company sales person
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Insured shares the risk of loss with all the other policy holders
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Insured can share the risk by spreading the cost over a number of years
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Risk of loss is shared with the government
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Detailed explanation-1: -Transfer of risk also is referred to as “spreading the risk:’ because the large losses of a few are distributed through an insurer to a large number of premium payers, each of whom pays a relatively small amount.
Detailed explanation-2: -The two most common risk sharing examples are insurance policies and indemnification clauses in contracts. Insurance policies are the most common risk sharing strategy. A company or individual will purchase an insurance policy from the insurance company that ensures coverage of unexpected loss.
Detailed explanation-3: -Reinsurance is insurance for insurance companies. It’s a way of transferring some of the financial risk insurance companies assume in insuring cars, homes and businesses to another insurance company, the reinsurer.
Detailed explanation-4: -In insurance terms, risk is the chance something harmful or unexpected could happen. This might involve the loss, theft, or damage of valuable property and belongings, or it may involve someone being injured.