In general,people are willing to pay more than the expected value of insurance because:
A)they are risk-averse enough to want protection against very large expenses.
B)the extra amount represents the value of having peace of mind about such occurrences happening.
C)there is utility gained from having the confidence that,if faced with enormous expenses as a result of risk,they will not lose their home or go bankrupt.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

All of the statements are reasons why people are willing to pay more than the expected value of insurance. People are risk-averse and seek protection, value peace of mind, and gain utility from the confidence that they will not face financial ruin in the event of a catastrophic event.

In General,people Are Willing to Pay More Than the Expected