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AssignmentMultiple Choice

Insurance

Question 1 • GA-GSE Personal Finance and Economics

Which statement correctly explains the relationship between risk and premium prices?

Answer
A
Prices are calculated according to a person’s risk of losing their income.
B
State governments use a person’s risk of filing a claim to determine prices.
C
Prices are generally higher for those who have a greater risk of filing a claim.
D
Customers self-assess their risk of filing a claim and then bid on prices.

Explanation

Insurance premiums are generally higher when an insurer estimates that a person is more likely to file a claim. A greater chance of claims means the insurer may need to pay out more, so the premium is typically higher. This matches “Prices are generally higher for those who have a greater risk of filing a claim.”

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