Question

How does insurance protect a policyholder against financial loss?

A.by allowing the policyholder to make premium payments
B. by allowing the policyholder to make a claim for reimbursement
C. by allowing the policyholder to avoid maintenance costs for the insured items
D. by allowing the policyholder to pay for all the losses

Answer 1

B) By allowing the policyholder to make a claim for reimbursement

Answer 2

(A) by allowing the policyholder to make premium payments

Step-by-step explanation:

Insurance is a risk sharing device where the risk is shared between the policyholder and the insurance company through regular periodic payment called premium.

With the payments of premium, at the time of financial loss, loss sharing is possible between the policyholder and the Insurance Company as per the terms of the Insurance contract, entered by the two.

Hence, loss sharing at the time of financial loss is only possible when the policyholder pays regular premiums.