Alberta General Insurance Level 1 Practice Exam

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Ace your Alberta General Insurance Level 1 Exam with our comprehensive practice quiz. Tailored to mimic the real test, our quiz offers detailed explanations, expert tips, and all you need to succeed. Start your path to becoming a licensed professional today!

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What contributes to the spreading of risk by insurers?

Investing in stocks only
Ensuring large numbers of similar risks
Diversity and volume of insured risks
Focusing on one geographic location

The correct answer is: Diversity and volume of insured risks

Insurance companies spread the risk of loss by insuring a diverse range of risks and insuring a large volume of risks. This ensures that a single catastrophic event or loss does not significantly impact the company's financial stability. Option A is incorrect because investing in stocks only does not contribute to spreading risk. Stock investments are subject to market volatility and do not provide a stable source of income to cover potential losses. Option B is incorrect because insurance companies do not want to ensure large numbers of similar risks. This would put them at a higher risk of experiencing significant losses if a single event affects all those risks. Option D is incorrect because focusing on one geographic location puts the insurance company at risk of being affected by a catastrophic event or natural disaster that occurs in that location. Insuring risks in multiple locations helps to spread the risk and minimize potential losses.