Asked by Carzetta Allen on Jul 19, 2024
Verified
(Consider This) Which of the following statements about insurance and risk is true?
A) Insurance inhibits economic growth and investment by discouraging risk-taking.
B) Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk.
C) Insurance companies always earn profits because insurance premiums always exceed the payout for insured events.
D) Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.
Insurance
A contractual arrangement providing financial protection against losses or damages from specific risks, in exchange for premium payments.
Tolerance for Risk
is the degree to which an individual, investor, or organization is willing to endure uncertainty and potential losses in pursuit of potential gains.
- Understand the fundamentals of risk management and the role of insurance.
Verified Answer
ON
obrien neelyJul 22, 2024
Final Answer :
D
Explanation :
Insurance allows individuals or entities with a low tolerance for risk to transfer that risk to insurance companies, which can pool the risk across many clients and are better equipped to handle it due to their financial resources and risk management strategies.
Learning Objectives
- Understand the fundamentals of risk management and the role of insurance.
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