General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In the context of a medical expense policy, which of the following is the 'risk' the policy is designed to address?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Risk, as used in insurance, is the uncertainty concerning financial loss. A medical expense policy addresses the insured's exposure to future medical costs — the possibility that illness or injury will produce a financial loss the insured could not predict or budget for. The premium, the policy terms, and the insured's current health are all related to risk, but none of them is the risk itself. The risk is the uncertain future financial loss that the policy transfers to the insurer in exchange for the premium.
Why the other options are wrong
- B) The premium is the price paid for transferring the risk; it is consideration, not the risk itself.
- C) Benefit limits and exclusions define the scope of coverage; they describe how the policy responds to risk, not the risk itself.
- D) Current health status is a factor used to classify the insured's risk, but the risk is the future possibility of loss, not today's condition.
Memory hook
Risk = the uncertain bill you fear; premium = the price you pay to escape it.