Which of the following is a basic characteristic of insurance?
A)pooling of losses
B)avoidance of risk
C)payment of intentional losses
D)certainty about specific losses that will occur

Question

Quizplus · Accepted Answer

Pooling of losses is a basic characteristic of insurance where many individuals or businesses transfer the risk of facing financial losses to an insurer. The insurer collects premiums from all policyholders and uses the funds to pay for the losses of those who experience them. This spreads the risk and makes it more affordable for individuals or businesses to handle losses that may occur. Avoidance of risk is not a characteristic of insurance as insurance is meant to transfer risk, not avoid it. Payment of intentional losses is not a characteristic of insurance either, as insurance policies cover only accidental or unintentional losses. Certainty about specific losses that will occur is also not a characteristic of insurance, as insurance policies are meant to cover unforeseeable losses.

Which of the Following Is a Basic Characteristic of Insurance