Why Is a Large Number of Exposure Units Generally Required

question 1

Multiple Choice

Why is a large number of exposure units generally required for a risk to be insurable?

• A) It allows the insurer to accurately predict the aggregate dollar amount of loss.
• B) It allows for at least some losses to occur.
• C) It reduces speculative risk.
• D) It reduces both the speculative risk and pure risk.

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Definitions:

Operating Agreement

A legal document outlining the governance and operational guidelines of an LLC, including the rights and responsibilities of its members.

Voting Rights

The entitlements of shareholders or members of an organization to vote on matters affecting the governance of that entity.

Common Stock

The most usual type of corporate stock. It carries with it all the risks of the business and does not guarantee its holder the right to profits.