NABTEB QUESTIONS

State and explain FOUR reasons why some risks cannot be insured? – NABTEB QUESTION

(i) Difficulty in establishing the magnitude of the event i.e. Natural disasters are normally not prone to identifying the extent of damages caused. E.g. Earthquake, coast of submergence involves perishing the land mass and its attendant properties. It is not easy to calculate or estimate the value of properties affected. Therefore, nature of the disaster makes it impossible to calculate.

(ii) No statistic or reference point available. There is no reference point that could be used for estimating either minimum cost of damaged properties.

(iii) No definite time of the occurrence: Human beings do take up life assurance for certain period or span of their existence. But death knows no bound hence life assurance is non predictable even though it may happen at odd times, certain events happen to mankind that could not be traceable e.g. missing person, drowned or consumed by fire to no ones awareness.

(iv) Incompatible reasons for taking insurance for such individual.

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