General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In life insurance, which statement correctly distinguishes the subject of the insurance from the risk?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The subject of insurance is the person or property exposed to loss — in life insurance, the insured's life. The risk is the uncertainty or chance of loss — here, the possibility that death will cause financial loss to the beneficiary. Distinguishing the two matters because the policy must identify the subject (Section 381 requires the life insured to be stated) while underwriting evaluates the risk (the chance and degree of loss).
Why the other options are wrong
- B) The premium is the consideration paid for coverage, and cash value is an accumulation feature of permanent policies; neither is the subject of the insurance.
- C) The subject is the item exposed to loss, while the risk is the uncertainty of loss; they are related but distinct concepts.
- D) The insurer is the party assuming the risk, and the beneficiary receives the proceeds; neither is the subject of insurance.
Memory hook
Subject = what is at risk (the life). Risk = the chance it gets lost. Name the subject in the policy, price the risk in underwriting.