Insurance Companies Can Usually Cover the Claims of Policyholders Because

question 15

Multiple Choice

Insurance companies can usually cover the claims of policyholders because:

• A) the incidence of claims normally averages out across all policyholders.
• B) they issue a very limited number of policies.
• C) they are fully insured by the U.S. government.
• D) their stockholders will cover any cash shortfalls encountered by the company.

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Definitions:

Cash Account

An account that records all transactions involving cash inflows and outflows.

Cash Payments

Transactions where payment for goods, services, or obligations is made using physical currency or checks instead of digital means.

Collections

The act of receiving payments for bills or accounts receivable, often referring to efforts made to gather overdue payments.

Reconciling Items

Adjustments made to reconcile differences between two sets of records or accounts, often used in the context of comparing bank statements to internal records.