What is a characteristic of an insurance contract?

An insurance contract is characterized by the transfer of risk from the insured to the insurer, which is exactly what option B describes. In this arrangement, the policyholder pays a premium to the insurer in exchange for coverage against potential losses or risks, such as death, disability, or property damage. This transfer of risk is a fundamental principle of insurance, allowing individuals and businesses to manage and mitigate the financial consequences of unforeseen events.

In contrast, the other options do not accurately reflect the nature of insurance contracts. An insurance contract is not a gambling agreement; it is a carefully regulated legal contract that is based on risk assessment and underwriting principles. While insurance policies do cover a wide range of risks, they do not provide benefits for all types of losses without limits; they typically include exclusions and limitations to manage exposure. Additionally, insurance contracts require payment from the insured in the form of premiums. The structure of these agreements ensures that there is a financial commitment on the part of the insured, which is critical to the sustainability of the insurance model.