Question

Insurance is not a good option for managing risk when

A) the probability of loss is very small.
B) the benefits outweigh the costs.
C) you want to protect your existing and future net worth.
D) there is a likelihood that an event will cause a large financial loss.

Answer 1

Insurance may not be a good option for managing risk when the probability of loss is very small and premiums paid outweigh potential benefits.

Step-by-step explanation:

The question asks about scenarios in which insurance is not considered a good option for managing risk. Insurance is generally a wise strategy for protecting against significant financial loss from uncertain events by paying regular premiums to an insurance company. However, if the probability of loss is very small, the cost of the insurance may outweigh the benefits, negating the usefulness of the coverage. When evaluating insurance decisions, individuals and businesses assess the likelihood of events, the potential financial impact, and their ability to bear the loss without insurance.