Of 1000 homeowners insured with crown insurance, 250 live in a flood plain, 150 live in an area with frequent tornadoes, 100 live in earthquake prone regions, and the remaining 500 reside in small communities located in less hazardous regions. which of the following will likely apply to the low-risk group of homeowners? group of answer choices the low and medium-risk groups will pay less than the high-risk group those in the low-risk group will be discouraged from buying home insurance. they must buy insurance and pay more than the actuarially fair amount for their risk group those in the low-risk group will pay less than both the medium-risk and high-risk group

The answer is (B)

Explanation: For clarity, the options are:

(A) the low and medium risk groups will pay less than the high risk groups

(B) those in the low risk groups will be discouraged from buying home insurance

(C) they must buy insurance and pay more than the actually fair amount for their risk group

(D) those in low risk groups will pay less than both the medium risk and high risk groups

EXPLANATION:

(A) can't be the answer because in Insurance, you are not necessarily allowed to pay according to the exact risk you forsee. The company will have static amounts for each type of insurance e.g. home insurance, car insurance, etc. So, the low and medium risk groups will pay the same amount as the high risk groups once they have decided to insure their homes.

(B) is correct because low risk home residents who haven't taken up a home insurance will see that they don't really benefit from it as much as high risk home residents do. So they will be discouraged to take up a home insurance.

(C) the key word here is "must" and there is no enforcement when it comes to taking up an insurance plan

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