Long-life Insurance Company insures a large number of people with the knowledge that only a small proportion of them will die in any one year. The large number of premiums provides the funds to pay for the small number of deaths. This is risk

Question

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Risk pooling involves spreading financial risks evenly among a large number of people, which is what the insurance company is doing by using premiums from many to cover the few claims.

Long-Life Insurance Company Insures a Large Number of People with the Knowledge