Match each proposed insurance exposure with the primary element of an ideally insurable risk that it violates.
- A homeowner seeks coverage for the gradual, expected wearing out of their roof shingles over a 25-year period.The loss must be accidental and due to chance
- A commercial enterprise requests a policy to protect against revenue loss caused solely by a global economic depression.The loss must not be catastrophic
- An applicant wants to insure a collection of family letters that hold immense emotional significance but no market value.The loss must be definite and measurable
- A vehicle owner attempts to buy a policy designed solely to cover the $40 cost of routine monthly oil changes.The premium must be economically feasible
Answer
Gradual wearing out violates 'accidental and due to chance'. Global depression violates 'must not be catastrophic'. Family letters violate 'definite and measurable'. Routine oil changes violate 'economically feasible premium'.
Each proposed exposure fundamentally lacks one of the required criteria for private insurance. Wear and tear lacks fortuity (chance). Sentimental items lack measurable financial value. Depressions represent unpoolable catastrophic market risk. Routine maintenance involves administrative costs that destroy economic feasibility.
Step-by-Step Solution
Key Concept
The ideal elements of an insurable risk determine whether an exposure can be safely and practically insured by a private carrier.