Which of the following best describes life insurance?

Life insurance is best described as a cooperative risk-sharing plan. This concept hinges on the principle of pooling resources among a large group of individuals, where each member contributes premiums to a common fund. This fund is then used to pay out benefits to the beneficiaries of policyholders who pass away, thereby providing financial protection and security to families and dependents.

The cooperative nature is essential because it allows individuals to mitigate the financial burden that can result from an untimely death, spreading the risk across many policyholders rather than leaving it to solely one individual or family. It emphasizes mutual aid among policyholders instead of individualistic approaches to financial protection.

The other options do not accurately encompass the primary function of life insurance. While life insurance can be purchased by wealthy individuals, it is not just a luxury for the rich; many policies are structured to be accessible for individuals across a broad economic spectrum. The notion that it is available to only a specific group is misleading, as life insurance can be obtained by most adults, subject to certain underwriting criteria. Additionally, life insurance does not represent a speculative risk, as it is fundamentally about managing risk in a predictable way rather than engaging in uncertain and speculative ventures.