General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which of the following is an example of a loss exposure for an individual?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A loss exposure is a realistic possibility of financial loss. The chance of incurring medical expenses from a covered illness is exactly that, because the individual could actually lose money that must be replaced or paid. The premium is the price paid for protection, the commission is the producer's compensation, and investment returns belong to the insurer. None of those is a loss exposure for the individual policyholder, because none represents money the insured could lose.
Why the other options are wrong
- B) The premium is the cost of transferring the risk, not a possible loss that the policy covers.
- C) The agent's commission is compensation to the producer, not a loss exposure of the insured.
- D) Investment returns are the insurer's business results, not the individual's exposure to loss.
Memory hook
Exposure is your open pocket; premium is the price of zipping it.