When Insureds Engage in a Pooling of Risk

question 78

Multiple Choice

When insureds engage in a pooling of risk,

• A)each individual experiences an increase in his or her total risk.
• B)the individual risk accompanying future uncertain events is decreased.
• C)they can reduce the total losses of the insureds.
• D)total premiums will be less than total losses.

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Definitions:

Partner Capital Accounts

Accounts reflecting the individual investments of partners in a partnership, including their share of profits, losses, and any withdrawals.

Capital Additions

Investments or expenditures made to acquire or improve long-term assets, enhancing the asset value or extending its useful life.

Net Income

The net income of a business once all taxes, costs, and expenses have been deducted from the total revenue.

Debit Capital Balance

Occurs when the sum of debits in a capital account exceeds the sum of credits, indicating the amount invested by the owners into the business.