Final answer:
A buyer is prohibited from receiving the seller's insurance policy on a sold house because insurance is a contract of a personal nature, crafted based on the original owner's individual risk profile. so, option 4 is the correct answer.
Step-by-step explanation:
If an insured sells his house to another person, the buyer is prohibited from receiving the seller's insurance policy because insurance is a contract of a personal nature. Insurance policies are agreements made between the insurance company and an individual, based on the individual's risk profile. It involves an assessment of risks that are specific to the person insured. Consequently, when the property is sold, the insurance policy, which was designed based on the original owner's risks, does not transfer to the new owner. This individual will need to obtain their own insurance policy that reflects their risk profile.
It's important to remember that government laws and regulations also influence the insurance industry, sometimes requiring individuals to purchase specific types of insurance. For example, banks often require homeowners to have homeowner's insurance. Meanwhile, insurance companies may try to avoid selling insurance to those they consider high risk, to mitigate the problem of adverse selection. However, when everyone is required to purchase insurance, the market prices can reflect an average risk, leading lower-risk individuals to subsidize the cost for those with higher risks.