Economics · Principles of Insurance
When would a rational economic agent choose to purchase insurance for a potential risk?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1After the contingent event has already occurred.
- 2When the probability of the event's occurrence is low but its financial severity is high.✓
- 3When the probability of the event's occurrence is low and its financial severity is also low.
- 4When the individual can easily finance the losses of the contingent event on their own.
Correct answer
When the probability of the event's occurrence is low but its financial severity is high.
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