General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In a group health plan, each covered employee represents a 'loss exposure' to the insurer. In this context, a loss exposure is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A loss exposure is the possibility of loss to which a person or entity is subject — it is the chance that a loss will occur, not the loss itself. For the group health insurer, each covered employee is an exposure because the employee may become ill or injured and generate covered claims. The insurer pools thousands of these exposures and, through the law of large numbers, predicts how many will produce claims. The premium, existing bills, and benefit limits are different concepts.
Why the other options are wrong
- B) The premium is the consideration paid for coverage; it is not the exposure but the price of transferring it.
- C) Current unpaid bills are actual, present obligations — a loss already incurred, not a possibility of loss.
- D) A lifetime benefit limit caps the insurer's liability; it describes the policy's maximum, not the exposure.
Memory hook
Exposure = the maybe of a claim. Not the bill, not the price, not the cap.