Final answer:
Insurance is not about avoiding risks but managing them. People pay premiums so that they can receive assistance in covering costs associated with unexpected events like illnesses or injuries. The presence of insurance can lead to moral hazards, but it provides financial protection and predictability.
Step-by-step explanation:
The statement is false; purchasing insurance is not a way for consumers to avoid the risk of unexpected monetary losses from illnesses, but rather a way to manage that risk. Insurance allows individuals and firms to make regular payments, known as premiums, to an insurance company. The company calculates these premiums based on the probability of certain events occurring within a group. When members of the insured group suffer a specified adverse event, such as an illness, they receive payments from this pooled money to help cover the associated costs.
It is important to understand that having insurance may lead to a moral hazard, where individuals might engage in riskier behavior or utilize more healthcare services because they know that the financial risks are covered. However, people primarily buy insurance to protect themselves against the financial unpredictability and potentially high costs of risks such as illnesses or injuries.