Which of the following statements is correct?

Solution(By Examveda Team)

Risk pooling refers to the spreading of financial risks evenly among a large number of contributors. It diversify risks among people who make contributions in investment policies. Investment made by people are invested in other profitable ventures and returns are raised from the profitable ventures which are distributed to insurance policies holders in order to idemnify them in case of any loss occured to them. Therefore, risk of one person is shared among all by idemnifying the person in case of loss from the amount invested in insurance policies by other large number of people. Insurance is neither gambling, nor charity. It is not a kind of investment either. In investment, only returns are given to investment holder but in insurance , property or person is saved against any mishaps. At the time of loss occured, policy amount is reimbursed to risk holder.