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WAEC Commerce 1995 Question 30

Question 30

Insurance

Which of the following is not true of insurance?

  1. A.A large number of people face the same risk
  2. B.Possibility of making a profit out of an event
  3. C.Only a small number will actually suffer the loss in any one year
  4. D.A large number makes a small contribution to a common pool
  5. E.Possibility of assessing the frequency of occurrence of the event.
Show the answer and explanation

Answer: B (Possibility of making a profit out of an event)

Explanation

Insurance only restores the insured to his former position (indemnity); nobody may profit from a loss.