How Does an Insurance Policy Help Mitigate Risk

question 54

Multiple Choice

How does an insurance policy help mitigate risk?

• A)Individuals pay to reduce uncertainty in some aspect of their lives.
• B)Individuals are paid very large sums of money if they encounter any risk.
• C)Individuals pay money to ensure they don't experience any risk.
• D)Individuals pay a fee in exchange for the insurance company covering all expenses associated with risky behavior.

---

Definitions:

Unsecured Creditors

Creditors who have lent money without obtaining specific assets as collateral, meaning they have no special claim on the debtor's property if the debtor fails to pay.

Liabilities With Priority

Obligations that have a preferential claim over other types of debts in the event of a liquidation or bankruptcy.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal.

Unsecured Creditors

Creditors who have loaned money without any specific collateral, meaning they have a lower priority in case of the debtor's bankruptcy.