A Fairly-Priced Insurance Policy Is One in Which

question 38

Multiple Choice

A fairly-priced insurance policy is one in which:

• A)the insurance premium is equal to the expected value of the promised insurance payment.
• B)the insurance premium is equal to the expected value of the promised insurance payment plus a small profit for the insurance company.
• C)the insurance premium is equal to the variance of the expected value of the promised insurance payment.
• D)the insurance premium is equal to the variance of the expected value of the promised insurance payment plus a small profit for the insurance company.

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Definitions:

Profit Center

A branch or division of a business that is directly responsible for generating its own revenue and profits.

Property Tax Expense

The cost incurred by property owners for taxes assessed on their land and buildings, recognized as an expense for the business.

Direct Expense

A cost that can be directly attributed to a specific cost object, such as a product, department, or project, making it easy to trace the expense directly to its source.

Profit Center

A part of an organization that is directly responsible for generating its own revenue and profits.