a-homeowner-decides-to-purchase-fire-insurance-what-trade-off-are-they-making

Question

A homeowner decides to purchase fire insurance. What trade-off are they making?

Accepted Answer

Paying a small premium to avoid the risk of a large potential loss.

Answer

Reducing their utility by paying high premiums.

Answer

Maximizing their utility by avoiding all risks.

Answer

Increasing their risk exposure for potential gains.