Question

what is the purpose of insurance?
a) a method of increasing risk
b) a contract that provides financial protection against specific risks
c) a way to avoid all financial responsibilities
d) a guarantee of never experiencing loss

50
multiple choice 2 points
what is an opportunity cost?
a) the total amount of money spent
b) the benefit of the next best alternative when a decision is made
c) the amount of money saved
d) the amount of money earned
answer: b) the benefit of the next best alternative when a decision is made

Explanation:

Insurance is a financial product. Its core is to transfer risk. Option A is wrong as insurance reduces not increases risk. Option C is incorrect as it doesn't avoid all financial responsibilities. Option D is false as it can't guarantee no loss. Option B correctly describes it as a contract for financial protection against specific risks.

Answer:

B) A contract that provides financial protection against specific risks