The correct answer is D. Insurance pays when there is loss of asset.
Insurance is a contract between an insurer and an insured, where the insurer agrees to pay the insured for losses incurred as a result of a covered event. The insured pays a premium to the insurer in exchange for this coverage.
There are many different types of insurance, but they all share the same basic purpose: to protect the insured from financial loss. Insurance can protect against a wide range of losses, including property damage, theft, illness, injury, and death.
When an insured suffers a loss, they file a claim with the insurer. The insurer then investigates the claim and determines whether it is covered under the policy. If the claim is covered, the insurer will pay the insured the amount of the loss, up to the policy limits.
Insurance can provide peace of mind and financial security in the event of a loss. It is important to choose the right type of insurance and to understand the terms of your policy so that you can be sure that you are adequately protected.
Here is a brief explanation of each option:
- Option A: Insurance protects the asset. This is not always true. For example, if you have car insurance, the insurance company will not pay to repair your car if you are at fault in an accident.
- Option B: Insurance prevents its loss. This is also not always true. For example, if you have home insurance, the insurance company will not pay to repair your home if it is destroyed by a fire that you started.
- Option C: Insurance reduces possibilities of loss. This is true to some extent. For example, if you have car insurance, you may be less likely to drive recklessly, which could reduce the risk of an accident. However, insurance cannot completely eliminate the risk of loss.
- Option D: Insurance pays when there is loss of asset. This is the most accurate statement. When you have insurance, you are agreeing to pay a premium in exchange for the insurer’s promise to pay you for losses that are covered under the policy.