Question

Pick a pure risk (except fire). Discuss how close to an ideally insurable risk is your choice. Make sure you mention each of the requirements for an ideally insurable risk.  

2. Discuss how adverse selection could impact the insurability of that risk.

3. Add a section on how insuring that risk is not gambling.

4. Conclude your paper.

You will be graded on your use of the vocabulary in this course and your content. So, use words found in your text in the paper for the strongest grade. Place the paper in this Dropbox

Answer 1

1

a

The Pure Risk includes the the type Personal Risk which is on life of person - premature Death

a

Insuring on the person life is the best choice to fulfill the financial obligation of the family and their daily survival if incident happens.

c

It is most important for the family who is dependent on that person.

2

a

Adverse selection is a situation where market participation is affected by the Assymetric information(Insurance companies and insures have different information)

b

Insurance premium keep increasing by the company due to high death rate by huge addiction to smoking and drinking

c

Lot of lungs failure happens due to those addictions and The family claim the insurance of the person.

d

This leads to high increase of the Premiums by the insurance Companies which have impact on the Non smokers and health people who took insurance need to pay same Premium like others.

3

I agree the Point Insuring risk is not gambling

a

Gambling is Speculative - betting on uncertain event which may lead to gain or loss

b

Insuring the risk means it is pure risk where one is protecting them self from any possibility of certain event( death due to Accident or heart failure..etc)

Conclusion :

4

Insuring the Risk on life person is good choice.Protecting one from any future uncertain event, If incident occurs the insurance really protects the family survival

It wont affect children education due to death of the head of the family( say father), the insurance claim will fulfill all their basic needs.