Insurance one be reluctant to accept a $300 payment from one\'s neighbor to repl

Question

Insurance one be reluctant to accept a $300 payment from one's neighbor to replace his house should it burn down during the coming year? b) Why can an O B. It would be foolish to insure one's neighbor's house for $300 because one would probably lose the $300 to replace the house. The chance of the house burning down is fairly high. more than $300. That risk is not worth the $300 more than $300. That risk is worth the $300 means to pay for insuring customers. The relative risk to the insurance company is high. The insurance company insures many people. The ov O B. e offset by the many who simply send their premiums without a claim. The relative risk to the insurance company is low down is much lower when insured by a company. The relative risk to the insurance company is low low.

Explanation / Answer

solution:-

(a) option C.
it would be foolish to insure ones neighbors house for $300 because although one would probably collect $00 there is a chance to end up paying much more than $300 that rish is not worth the $300

(b) option B
the insurance company insures many people the overwhelming majority of custoemrs pay and never have a claim the few customers who do not have a claim are offset by the many who simply send their premiums without a claim the relative risk to the insurance company is low

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