There are numerous definitions of insurance. based on the definition stated in the text, indicate whether each of the following guarantees is considered insurance.

a. The manufacturer guarantees a new television against defects for 90 days.
b. The manufacturer guarantees a new set of radial tires against road defects for 50,000 miles.
c. A builder of new homes gives a 10-year guarantee against structural defects in the home.
d. A cosigner of a note agrees to pay the loan balance if the original debtor defaults on the payments.
e. A large group of homeowners agrees to pay for losses to homes that are damaged or destroyed by fire during the year.

Insurance is an arrangement whereby an economic entity like the individual or firm undertakes and agree to provide compensation for losses, damages or death to the insured.

a. The manufacturer guarantees a new television against defects for 90 days.

This is simply a guarantee and it's not an insurance. There are no pooling of losses even though risks are being transferred to the manufacturer.

b. The manufacturer guarantees a new set of radial tires against road defects for 50,000 miles.

This is also a guarantee and it's not an insurance. There are no pooling of losses even though risks are being transferred to the manufacturer. In a scenario whereby the tires are stolen, they won't be replaced.

c) A builder of new homes gives a 10-year guarantee against structural defects in the home.

This is just a guarantee and not an insurance. Even though risk are being transferred to the builder once there are structural defects, the owner of the home will bear the loss in case of fire.

d. A cosigner of a note agrees to pay the loan balance if the original debtor defaults on the payments.

This is not an insurance. This is just explaining that the consigner bears the risk of payment if the original debtor defaults.

e. large group of homeowners agrees to pay for losses to homes that are damaged or destroyed by fire during the year.

This is an insurance as losses are being pooled. The firm of insurance that'll be utilized here is the fire insurance.

dubeyshailja64 dubeyshailja64 · Answer 2 · 2022-04-01T11:54:16+02:00

Statements a,b,c, and d are guarantees and statement e represents insurance.

What are a guarantee and insurance?

Insurance refers to the protection from the financial loss that the insurance holder otherwise would suffer. Insurance is a type of indemnity where one party promises to indemnify the insurer in case of loss.

Whereas gurantee can be defined as contract in which one party agrees to act on behalf of the other party in case of defaults by other party.

Therefore the statement a, b , c, and d are guarantee and the statement e represents insurance.

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