We buy life insurance in order to transfer

Question

Quizplus · Accepted Answer

Life insurance is purchased in order to transfer the pure risk of premature death to the insurance company. Pure risk involves possible loss only and no chance of gain or profit. The insurance company guarantees a payment in the event of death, providing financial protection to the insured's beneficiaries. Adverse risk and negative risk are not common terms in insurance, and speculative risk involves the possibility of gain or loss, which is not associated with life insurance.

We Buy Life Insurance in Order to Transfer