Match each proposed insurance scenario with the core requirement of an ideally insurable risk that it most directly violates.
- A homeowner seeks a policy to cover the inevitable deterioration of their 25-year-old asphalt shingle roof.The loss must be accidental, fortuitous, and unintentional.
- An individual attempts to insure a handwritten family recipe book for $100,000 based entirely on its deep emotional significance.The loss must be definite, measurable, and have an objective financial value.
- A small, localized insurance company writes hurricane property coverage for every single home situated on a small barrier island.The loss must not be catastrophic to the insurer.
- A person wants to insure a 65.The premium must be economically feasible.
Answer
The scenarios match their violated elements as follows: inevitable roof deterioration violates the fortuitous/accidental requirement; sentimental recipe book violates the measurable financial value requirement; concentrated barrier island risks violate the non-catastrophic requirement; and paying a 40 item violates the economically feasible premium requirement.
Each scenario illustrates a fundamental breakdown in the underwriting criteria required for an ideally insurable risk. Risks must be accidental (not wear and tear), measurable in dollars (not just feelings), spread out to prevent insolvency (not geographically concentrated), and cost-effective to insure.
Step-by-Step Solution
Key Concept
Elements of Insurable Risk
Estimated Time:1m 30s