Question

Insurance is _____________ when the possible loss is relatively large compared to the amount of the premium.

Answer 1

Using economic understanding, insurance is "Economically feasible" when the possible loss is relatively large compared to the premium amount.

This is because when an individual insured on a premium account loses huge properties that are considerably large compared to the premium paid, this is economically feasible to such an individual.

For example, if an individual has his vehicle worth $1 million on damaged but has only paid less than $100,000 as insurance fee, such individual would have his car replaced by the insurance firm, despite only paying 10 percent of the car price as insurance fee.

Thus, this situation is considered economically feasible.

Hence, in this case, it is concluded that the correct answer is "Economically feasible."

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