CAS Practice Exam 2025 – Complete Study Guide

Question: 1 / 400

What is one key advantage of guaranteed cost insurance?

Effective in paying for losses

Guaranteed cost insurance is designed to provide a specific level of coverage at a fixed premium, which means that the insured knows exactly what they will pay for the coverage upfront. This eliminates the uncertainty around costs, making budgeting easier for businesses.

The structure of guaranteed cost insurance means that the insurer takes on the risk of losses. Therefore, the premiums are set to cover the expected losses and associated administrative costs, allowing for effective management of insurance expenses.

Unlike other options, which may involve varying levels of risk retention, regulatory complexities, or other payment structures, guaranteed cost insurance stands out by providing clear and predictable costs while fully transferring the risk of loss to the insurer. This characteristic is what firmly reinforces option A as the key advantage of this insurance type.

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Higher risk retention

Less regulatory compliance

No payment for losses

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