Question

All insurance is based on a principle called

Answer 1

The correct answer is:

Risk.

Explanation:

All types of insurance, home, auto, life, etc., are based on the risk a company takes in providing the insurance.

Each person has a specific risk of being in an auto accident. This risk can be raised or lowered by specific behaviors, different types of cars, age of the driver, etc.

Each person has a specific risk of losing their home. This can be based on the location of the home, the materials used in construction, etc.

These risk factors will raise or lower the amount a person pays in premiums, so that the company does not lose money.

Answer 2

Any type of insurance, be it home, auto, life, health, etc. are based on a principle of division of risk. This is based on how much risk the insurer estimates the insured's coverage to be. The riskier the opportunity (bad health, area the home is in) the higher the premium costs.