In Determining Insurance Limits and Deductibles,an Important Concept Is That

question 21

Multiple Choice

In determining insurance limits and deductibles,an important concept is that insurance should be used to pay big losses rather than small losses.The objective is to insure big losses that could cause financial ruin and to exclude small losses that can be budgeted out of current income.This concept is called the

• A)law of large numbers.
• B)efficient loss-cost concept.
• C)large-loss principle.
• D)retention-transfer tradeoff.

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Definitions:

Date-Stamping

The process of marking documents with the date they are received or processed.

Bookkeeping

The systematic recording, organizing, and managing of financial transactions for a business or individual.

Investigations

The systematic examination or inquiry into something to uncover facts, gather evidence, or determine the truth.

Sole Proprietorship

A business owned and operated by one person, where there is no legal distinction between the owner and the business entity.