Which defines insurance?
• A risk control strategy that encourages taking action to reduce the likelihood of a loss occurring
• An agreement between two individuals to protect each other against negative events
• A policy purchased from a company that provides financial protection against financial loss or harm caused by a possible event
• A program that manages risk by avoiding it
• A policy purchased from a company that provides financial protection against financial loss or harm caused by a possible event
The correct answer is:
A policy purchased from a company that provides financial protection against financial loss or harm caused by a possible event.
The correct answer is:
A policy purchased from a company that provides financial protection against financial loss or harm caused by a possible event.
To find the correct answer, we can examine each option and evaluate it based on the given definitions:
1. A risk control strategy that encourages taking action to reduce the likelihood of a loss occurring: While risk control is an important aspect of insurance, it does not fully define insurance itself. It focuses more on the prevention of losses rather than the financial protection aspect. Therefore, this option is not the correct answer.
2. An agreement between two individuals to protect each other against negative events: This definition describes a mutual agreement between individuals, which is not necessarily insurance. Insurance involves purchasing a policy from a company rather than making an agreement directly with another person. Therefore, this option is not the correct answer.
3. A policy purchased from a company that provides financial protection against financial loss or harm caused by a possible event: This definition accurately describes insurance. It emphasizes the purchase of a policy from a company to safeguard against potential losses or damages. This option is the correct answer.
4. A program that manages risk by avoiding it: This definition describes a risk management strategy, but it does not encompass the concept of insurance completely. Insurance provides protection in the event of a loss, rather than solely focusing on risk avoidance. Therefore, this option is not the correct answer.
Therefore, option 3 is the most accurate definition of insurance. It corresponds to the concept of purchasing a policy from a company to obtain financial protection against potential loss or harm caused by a possible event.