Which statement about the benefits that insurance provides is correct?

Which statement about the benefits that insurance provides is correct?

• A. Insurance guarantees profits
• B. Insurance eliminates all business risk
• C. Insurance pays out for every loss
• D. Investment income helps keep insurance premiums at a reasonable level

Answer: (D)

When you think about the benefits of insurance, focus on how premiums are used to cover expected claims and expenses, and how investing those premiums helps keep costs stable. Insurance companies invest the premiums they collect, and the investment income supports reserves and overall profitability. That income can lower the net cost of risk for policyholders and help keep premiums reasonable over time. The other statements aren’t accurate: insurance doesn’t guarantee profits, it doesn’t eliminate all business risk, and insurers don’t pay out for every loss—claims are subject to policy terms, limits, and exclusions.

When you think about the benefits of insurance, focus on how premiums are used to cover expected claims and expenses, and how investing those premiums helps keep costs stable. Insurance companies invest the premiums they collect, and the investment income supports reserves and overall profitability. That income can lower the net cost of risk for policyholders and help keep premiums reasonable over time.

The other statements aren’t accurate: insurance doesn’t guarantee profits, it doesn’t eliminate all business risk, and insurers don’t pay out for every loss—claims are subject to policy terms, limits, and exclusions.