Insurance works on the principle of
A)Sharing
B)Probabilities
C)Large numbers
D)All the above

Question

Quizplus · Accepted Answer

Insurance works on the principle of sharing, probabilities, and large numbers. Sharing means that the risk of loss is spread among a large number of people, so that no one person has to bear the entire cost of a loss. Probabilities means that the insurance company uses statistical data to calculate the likelihood of a loss occurring, and then sets the premium accordingly. Large numbers means that the insurance company has a large number of policyholders, so that the law of averages can be used to predict the number of losses that will occur.

Insurance Works on the Principle of