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D
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Question Stats:
81% (01:47) correct
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wrong
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Fewer families lose their houses because of major disasters such as fire or flood than because of a wage earner’s illness that results in death or disability. Yet, whereas most mortgage companies require borrowers to carry insurance to protect against major disasters, they do not require insurance to protect against the death or disability of a wage earner.
Which of the following, if true, would contribute most to an explanation of the difference in insurance requirements?
(A) Some people are less aware of tragedies caused by major disasters than of those caused by the death or disability of a wage earner.
(B) Many people are made uncomfortable by having to consider the possibility of their own death or disability or that of a family member.
(C) Few wage earners are insured by their employers against a temporary loss of income resulting from disability.
(D) The value of a property to a mortgage company is not affected by the death or disability of a wage earner.
(E) Insuring against major disasters can be more costly than insuring against death or disability.
Which of the following, if true, would contribute most to an explanation of the difference in insurance requirements?
(A) Some people are less aware of tragedies caused by major disasters than of those caused by the death or disability of a wage earner.
(B) Many people are made uncomfortable by having to consider the possibility of their own death or disability or that of a family member.
(C) Few wage earners are insured by their employers against a temporary loss of income resulting from disability.
(D) The value of a property to a mortgage company is not affected by the death or disability of a wage earner.
(E) Insuring against major disasters can be more costly than insuring against death or disability.
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01 Aug 2022, 00:29
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The basic puzzle is this: Death or disability seem to be larger sources of job loss than disasters are. So why do we have to have disaster insurance for our mortgages, but not death/disability insurance? We need some new information that makes this requirement make more sense.
A) "Some people" doesn't tell us much--this could be 1% of the population! So even if we stretched to imagine that the insurance requirement is based on awareness, this choice doesn't actually indicate which threat is more generally known, or how often people would choose to purchase such insurance on their own.
B) This choice has a similar quantity problem. "Many people" (unlike "most") is still very vague, and could be a very small segment of the overall population. In any case, the discomfort described here could just as well be a reason TO REQUIRE death/disability insurance, since those who don't want to think about the issue are unlikely to make the purchase when left to their own devices. In the end, it's not clear that discomfort among some portion of the population explains why an apparently important form of insurance is not required.
C) This is the opposite of what we want! If few people are insured by their employers, that's all the more reason to require them to buy this insurance on their own.
D) There we go! This is basically saying "Mortgage companies don't care if we die." Okay, it doesn't literally say that, but we can see from this how the incentives work. Imagine that there's a major fire or earthquake and our house is destroyed. At the same time, we have no job and can't pay our mortgage. The mortgage company has no way to make their money back. They can't sell the house--it's now gone--and they can't make us pay, since we have no money. On the other hand, if we die or are disabled and stop making payments, they can just sell our house and get their money, so it doesn't affect them much. That's life in the big city, kid.
E) Like C, this goes the wrong way. Why is the more costly form of insurance required, especially if it covers a rarer instance? (And keep in mind that there's no indication that the mortgage companies are getting any of that insurance premium money, so high prices are not an incentive for the requirement.)
The basic puzzle is this: Death or disability seem to be larger sources of job loss than disasters are. So why do we have to have disaster insurance for our mortgages, but not death/disability insurance? We need some new information that makes this requirement make more sense.
A) "Some people" doesn't tell us much--this could be 1% of the population! So even if we stretched to imagine that the insurance requirement is based on awareness, this choice doesn't actually indicate which threat is more generally known, or how often people would choose to purchase such insurance on their own.
B) This choice has a similar quantity problem. "Many people" (unlike "most") is still very vague, and could be a very small segment of the overall population. In any case, the discomfort described here could just as well be a reason TO REQUIRE death/disability insurance, since those who don't want to think about the issue are unlikely to make the purchase when left to their own devices. In the end, it's not clear that discomfort among some portion of the population explains why an apparently important form of insurance is not required.
C) This is the opposite of what we want! If few people are insured by their employers, that's all the more reason to require them to buy this insurance on their own.
D) There we go! This is basically saying "Mortgage companies don't care if we die." Okay, it doesn't literally say that, but we can see from this how the incentives work. Imagine that there's a major fire or earthquake and our house is destroyed. At the same time, we have no job and can't pay our mortgage. The mortgage company has no way to make their money back. They can't sell the house--it's now gone--and they can't make us pay, since we have no money. On the other hand, if we die or are disabled and stop making payments, they can just sell our house and get their money, so it doesn't affect them much. That's life in the big city, kid.
E) Like C, this goes the wrong way. Why is the more costly form of insurance required, especially if it covers a rarer instance? (And keep in mind that there's no indication that the mortgage companies are getting any of that insurance premium money, so high prices are not an incentive for the requirement.)
General Discussion
jaizen
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01 Sep 2011, 10:46
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the answer is D.
It is the the only answer tha explains why mortgage companies require insurance against natural disasters. Natural distasters can damage property such as your home whereas the death of the insured need not..
It is the the only answer tha explains why mortgage companies require insurance against natural disasters. Natural distasters can damage property such as your home whereas the death of the insured need not..
