Which concept means the loss is borne by another party; will not eliminate the risk of death or illness, but relieves the insured of the financial losses these risks bring?

Which concept means the loss is borne by another party; will not eliminate the risk of death or illness, but relieves the insured of the financial losses these risks bring?

• A. Retention
• B. Reduction
• C. Transfer risk
• D. Not catastrophic

Answer: (C)

Transferring risk is shifting the financial consequences of a potential loss to someone else, typically an insurer, through an insurance contract. You still face the possibility of death or illness, but the monetary impact is borne by the insurer rather than by you personally. This transfer is achieved by paying premiums in exchange for coverage, so when a covered event occurs, the insurer pays the claims up to the policy’s limits. Retention would mean you bear the costs yourself, taking on the financial risk instead of passing it along. Reduction involves actions that lower either the likelihood or the severity of the loss. The notion of “not catastrophic” isn’t a standard risk-management concept in this context.

Transferring risk is shifting the financial consequences of a potential loss to someone else, typically an insurer, through an insurance contract. You still face the possibility of death or illness, but the monetary impact is borne by the insurer rather than by you personally. This transfer is achieved by paying premiums in exchange for coverage, so when a covered event occurs, the insurer pays the claims up to the policy’s limits.

Retention would mean you bear the costs yourself, taking on the financial risk instead of passing it along. Reduction involves actions that lower either the likelihood or the severity of the loss. The notion of “not catastrophic” isn’t a standard risk-management concept in this context.