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      Question

      In a "hard market," what typically happens to insurance

      premiums and coverage?
      A Premiums decrease and coverage is expanded. Correct Answer Incorrect Answer
      B Premiums increase and coverage is restricted Correct Answer Incorrect Answer
      C Premiums remain stable and coverage is expanded Correct Answer Incorrect Answer
      D Premiums remain stable and coverage is restricted Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      The correct answer is B. Premiums increase and coverage is restricted. In a hard market, insurers become more selective in the risks they underwrite, often reducing coverage and increasing premiums to maintain profitability.

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