Question

All of the following statements regarding insurance policies are correct EXCEPT:

Group of answer choices

Adverse selection is the tendency of those that most need insurance to purchase insurance policies while those with the least perceived risk are less likely to pay the necessary premiums for insurance.

An endorsement is a modification or change to a life or health insurance policy.

Co-payments are loss-sharing arrangements whereby the insured pays a flat dollar amount or percentage of the loss in excess of the deductible.

Deductibles serve as motivation for an insured to take precautions to avoid losses or to prevent the filing of false claims.

Answer 1

Solution:-

Option 1: Adverse selection is a situation that develops when insurers try to make their policies available for a broader audience and it results in tendency towards people with higher risk buying policies rather than the ones who have lesser perceived risk. Hence, this statement is correct

Option 2: An endorsement is modification or change in the coverage terms of any policy and not just life or health insurance policy. Therefore, this statement is not correct and this option is the right option

Option 3: Co-payments are an arrangement where both the insurers and insured bear the loss due to damage. This statement is correct

Option 4: Deductibles result in insured having to bear a part of loss in case of damage and therefore, acts as a motivation to avoid losses and prevent filing false claims. This statement is correct.

Therefore, based on above, the correct option is the second option.