In determining insurance limits and deductibles,an important concept is that insurance should be used to pay big losses rather than small losses.The objective is to insure big losses that could cause financial ruin and to exclude small losses that can be budgeted out of current income.This concept is called the
A)law of large numbers.
B)efficient loss-cost concept.
C)large-loss principle.
D)retention-transfer tradeoff.

Question

Quizplus · Accepted Answer

The concept described is the large-loss principle, which advocates for insuring against big losses that could have catastrophic financial consequences while excluding smaller losses that can be absorbed by current income. This principle helps insurers to balance their financial exposure with the cost of insurance premiums for customers.

In Determining Insurance Limits and Deductibles,an Important Concept Is That