An individual insured against a particular cost,

Question

Quizplus · Accepted Answer

All of the above options are true. When an individual is insured against a particular cost, they may have reduced incentives to take precautions against the costs because the insurance will cover it. Additionally, they may take on additional risk because they are insured, assuming that the insurance will cover it. As a result, they may face incentives that result in higher insurance rates because their increased risk-taking increases the likelihood that the insurance will need to be used.

An Individual Insured Against a Particular Cost