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What is an actuarially fair insurance contract?

A. A contract that describes the percentage of the expected payout required for the insurer to stay in business.
B. A contract that ensures that the tax shield is less than the loading fee for the insurer.
C. A contract that ensures that the tax shield is greater than the loading fee for the insurer.
D. A contract in which the premium paid by the consumer is equal to the expected benefit paid back to the consumer in the case of a loss.



Answer :

GinnyAnswer

Final answer:

An actuarially fair insurance policy is when premiums paid equal the expected benefits provided in case of a loss, ensuring fairness and accuracy in cost distribution.


Explanation:

An actuarially fair insurance policy is a contract in which the premiums paid by the consumer equally match the expected benefits paid back to the consumer in the event of a loss. This means that each individual pays according to their risk group, ensuring fairness within the insurance system.


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