The correct statement is: C. Insurance compensates for the loss of the value of assets.
Insurance is a contract between an insurer and an insured, where the insurer agrees to pay the insured a sum of money in exchange for a premium, in the event that a specified event occurs. The event that is insured against is called the “risk”.
The purpose of insurance is to protect the insured from financial loss in the event of a loss. Insurance can be used to protect a wide range of assets, including property, vehicles, health, and life.
When an insured suffers a loss, the insurer will pay the insured a sum of money, called the “claim”. The amount of the claim will depend on the terms of the insurance policy.
Insurance can provide peace of mind to the insured, knowing that they are protected from financial loss in the event of a loss. Insurance can also help to protect the insured’s assets, by providing a fund to cover the cost of repairs or replacement.
Here is a brief explanation of each option:
- Option A: Assets are protected by insurance. This is not always the case. For example, if a property is destroyed by fire, the insurance company may not be able to pay the full amount of the claim, depending on the terms of the insurance policy.
- Option B: Insurance prevents loss to assets. This is also not always the case. For example, if a person is injured in an accident, the insurance company may not be able to prevent the injury from happening.
- Option C: Insurance compensates for the loss of the value of assets. This is the most accurate statement. Insurance can provide financial compensation to the insured in the event of a loss.
- Option D: Probabilities of loss are considerably reduced by insurance. This is true to some extent. Insurance can help to reduce the risk of loss, but it cannot eliminate it entirely.