The purpose of insurance is to:Develop a savings planProvide an investment opportunityTransfer financial riskAll of the above
Question
The purpose of insurance is to:Develop a savings planProvide an investment opportunityTransfer financial riskAll of the above
Solution
The primary purpose of insurance is to transfer financial risk. Insurance is a contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.
While some insurance policies can have investment components (like certain types of life insurance), and some people may feel having insurance helps them save money in the long run, these are not the primary purposes of insurance. Therefore, the correct answer is "Transfer financial risk".
Similar Questions
The primary function of insurance is to maintain yourexisting level of wealth.
Insurance is based on the principle of ______________.(1.0 Marks)Tax Benefits And InvestmentsAInvestment Risks And ReturnsBSpreading Of Risks And Sharing Of LossesCChildren's Education Goals And Tax Benefits
Analyzing the Role of Insurance in Corporate Strategies
Which of the following is essential for protecting people’s finances from large expenses or loss of income?InsuranceSavings accountsMutual fundsFixed deposits
A system of deposit insuranceA) attracts risk-taking entrepreneurs into the banking industry.B) encourages bank managers to decrease risk.C) increases the incentives of depositors to monitor the riskiness of their bank's assetportfolio.D) increases the likelihood of bank runs.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.