Which of the following statements regarding primary insurance is true?

Primary insurance serves as the first line of defense in risk management by providing direct coverage to policyholders for various types of risks or losses. This means that when a loss occurs, the primary insurance policy is the first to respond and pay out claims before any other layers of coverage, such as excess or secondary insurance, come into play. By being the initial tier of protection, primary insurance is integral in managing risk and ensuring policyholders are financially supported in the event of a loss.

The other statements do not accurately reflect the nature of primary insurance. For example, while some types of insurance may cover specific losses, primary insurance, in general, does not limit itself to only those types — it can cover a wide range of risks. Additionally, primary insurance typically involves only one insurer providing the coverage, rather than requiring two. Lastly, the cost of primary insurance varies widely depending on several factors, and it is not a definitive rule that it will always be more expensive than reinsuring. This variation is based on specific policies, terms, and the nature of the coverage being sought.