AD Banker Comprehensive Practice Exam

What types of risks do insurers typically avoid covering?

1. Low-risk individuals

2. Uninsurable risks

3. Insurable losses

4. Auto accidents

The correct answer is: Uninsurable risks

Insurers typically avoid covering uninsurable risks because these risks are not appropriate for traditional insurance protections. Uninsurable risks are those that cannot be quantified or are deemed too high in potential loss that they fall outside the scope of standard insurance policies. These might include risks associated with acts of war, natural disasters that are catastrophic in nature without proper risk management, or liabilities that cannot be predicted or controlled. By avoiding uninsurable risks, insurers ensure that they can maintain a balanced risk portfolio, allowing them to cover claims from policyholders effectively. This practice helps them remain solvent and able to pay out valid claims to insured parties. In contrast, low-risk individuals and insurable losses typically fall within the scope of coverage that insurers are willing to accept, while auto accidents, assuming they are within the coverage periods and conditions of the policy, are generally insurable events.