Multiple choice

Insurance is a method of

  1. Dividing Risk

  2. Assuming Risk

  3. Shifting of Risk

  4. None of these
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A Correct answer
Explanation

Insurance is a method of dividing risk. As insurance is based on the law of large numbers, it is a method of sharing risks. A large number of persons exposed to a risk contribute to a fund which is utilised to compensate the very few who actually suffer the loss from the insured risk.

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