Final answer:
The concept where the insured pays a small premium while the insurance company takes on a large risk is known as aleatory.
Step-by-step explanation:
The concept where the insured pays a small amount of premium for a large amount of risk on the part of the insurance company is known as aleatory. In an aleatory contract, the exchange of value is unequal and depends on uncertain future events.
In the context of insurance, the policyholder pays regular premiums to the insurer, and in return, the insurance company takes on the risk of covering large potential financial losses from specified events.
Aleatory refers to the element of chance or uncertainty that is inherent in insurance contracts. In this case, the insured may pay a relatively small premium, but they are taking on the risk that they may experience a significant financial loss that the insurance company would be responsible for covering.