How does 'risk pooling' benefit policyholders?

This answer is correct because risk pooling is a fundamental concept in insurance that allows individuals to share their risks collectively. When policyholders enter into a risk pool, they combine their resources to cover the losses that some members of the group may experience. This collective approach leads to a more manageable distribution of risk and can help to mitigate the financial impact on any single individual.

By participating in risk pooling, policyholders can access broader coverage and more affordable premiums, as the costs associated with high-risk events are spread across a larger group. This mechanism serves to lower the overall risk for each individual, promoting stability and predictability in terms of financial responsibility for unexpected issues such as medical expenses or property damage.

The other options do not accurately reflect the nature of risk pooling. Increasing premiums over time does not define risk pooling; it is a result of various factors, including claims experience. Limiting access to benefits contradicts the principle of risk pooling, which aims to provide coverage when needed. Additionally, keeping insurance exclusive goes against the collaborative and inclusive premise of pooling risks, which is meant to create a safety net for all members involved.