Which of the Following Statements Best Reflects the Concept Behind

question 71

Multiple Choice

Which of the following statements best reflects the concept behind the rule of indemnity?

• A)If a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.
• B)If a written contract exists between the insured and an insurance company,the insured is entitled to receive the maximum amount stated in the contract in the event of a loss.
• C)If an insurance company's premiums generate excess funds,these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums.
• D)An insured person cannot collect more than the actual loss from an insurable risk.

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Definitions:

Redeem Bonds

This term refers to the act of paying off or buying back bonds issued by a company before their maturity date, often at a predetermined price.

Bond Purchase

The act of acquiring bonds, which are securities representing a loan made by an investor to a borrower, often for the purpose of investment and receiving interest income.

Profit Margin

A financial ratio that measures the percentage of profit a company earns from its total revenue.

Total Asset Turnover

Total asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue; it indicates how well a company can convert its assets into revenue.