When the size of the potential loss is small, most people will
A)insure because insurance costs less than the expected loss.
B)self-insure because they can afford it and the expected loss less than the insurance premium.
C)self-insure because the expected loss cannot be calculated.
D)self-insure because insurance companies do not like to insure for small losses.

Question

Quizplus · Accepted Answer

When the potential loss is small, self-insurance is often a better choice as the expected loss is less than the insurance premium. It is usually more cost-effective to self-insure rather than paying premium for a small potential loss. Additionally, some small losses may not be covered by insurance policies, based on the policy conditions, making self-insurance the better option.

When the Size of the Potential Loss Is Small, Most