Final answer:
Insurance is a financial service providing coverage for unforeseen damage, injury, or loss, with policyholders paying premiums to an insurance entity. The entity offers compensation when the insured event occurs, and the mechanisms such as deductibles and copayments reduce moral hazards. The correct term for this service is c. 'coverage'.
Step-by-step explanation:
Insurance is a financial service that offers a kind of protection in the event of unforeseen damage, injury, or loss. This key financial method enables households and firms to prevent a single event from causing a significant detrimental financial impact. People or entities with insurance make regular payments known as premiums to an insurance company, which then pools these premiums to cover the potential risks shared among its policy holders.
When a policyholder suffers a significant financial loss from an event covered by the policy, the insurance firm provides compensation from this pool of money. The insurance mechanism also includes concepts such as deductibles, copayments, and coinsurance which serve to reduce moral hazard, as they make sure that the insured parties retain some responsibility and incentive to avoid or minimize the risks covered by the policy.
From the options provided, the answer to the student's question on which financial service offers protection in the event of unforeseen events is coverage, making option c) the correct answer.