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JAMB Commerce 2001 Question 25

Question 25

Insurance

Pooling of risk in insurance means that

  1. A.compensations are paid out of a common fund
  2. B.two people can pool their risks to be insured
  3. C.two insurance companies can buy two policies
  4. D.insurance companies should encourage taking risks.
Show the answer and explanation

Answer: A (compensations are paid out of a common fund)

Explanation

Many people pay premiums into a common pool from which the few who suffer losses are compensated.