Question

question 4
10 pts
insurance is frequently described as a method of \sharing the risk\ because the:

• insured shares the risk of loss with all the other policy holders
• insured can share the risk by spreading the cost over a number of years
• risk of loss is shared with the insurance company sales person
• risk of loss is shared with the government

question 5
10 pts
lucy has no insurance. the situation(s) should she consider insuring against first are:

• losses resulting from an illness, accident, or disability
• auto collision, and burglary
• death so her financial obligations are paid
• property losses and auto accidents

Explanation:

Question 4

To determine why insurance is "sharing the risk", we analyze each option:

• Option 1: Insurance works by pooling premiums from all policyholders. If one has a loss, the funds (from all policyholders) are used to cover it. So the insured shares risk with other policyholders.
• Option 2: Spreading cost over years is about payment timing, not risk - sharing.
• Option 3: Insurance salespeople don't share the risk of loss; they sell policies.
• Option 4: Insurance companies, not the government, handle most insurance risks.

When deciding what to insure first, we consider the severity and likelihood of losses:

• Option 1: Losses from illness, accident, or disability can lead to high medical costs or loss of income, which are critical and immediate risks.
• Option 2: Auto collision and burglary are property - related, but not as urgent as health - related losses.
• Option 3: Death - related insurance (like life insurance) is important, but for a person without insurance, immediate health/income - related risks are more pressing.
• Option 4: Property and auto accidents are less critical than health - related losses for initial insurance.

Answer:

A. Insured shares the risk of loss with all the other policy holders

Question 5