General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
For a risk to be ideally insurable, the premium must be:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An ideally insurable risk must be economically feasible: the premium should be affordable relative to the potential loss and to the insured's means. If the premium were so high that coverage made no financial sense, the insurance would serve no purpose. Premiums are also risk-based — they reflect the expected cost of losses in each classification — so they are not identical for everyone and should never exceed the magnitude of the loss they protect against.
Why the other options are wrong
- B) A premium exceeding any possible loss would make insurance irrational; the premium must be a small fraction of the potential loss to be feasible.
- C) Premiums vary with risk classification; charging every applicant the same amount regardless of risk would be neither fair nor actuarially sound.
- D) Premiums are typically paid periodically, not for the whole life of the policy in one advance payment; payment mode does not define insurability.
Memory hook
Feasible premium = the price must fit the loss and the wallet. A $10,000 premium for a $1,000 loss is nonsense.