When a business owner buys insurance, he or she is trading a potentially large but uncertain loss for a small but certain one.

Question

Quizplus · Accepted Answer

This statement is true. By buying insurance, a business owner is paying a small premium to transfer the risk of a potentially large and uncertain loss (such as damage to property or liability for an accident) to the insurance company, which will pay for the loss if it occurs. The small premium is a certain cost, while the potentially large loss is uncertain.

When a Business Owner Buys Insurance, He or She Is