Question
Which of the following describes the act of insuring a risk against possible loss?
A. Loss management
B. Risk transfer
C. Hazard reduction
D. Risk avoidance
A. Loss management
B. Risk transfer
C. Hazard reduction
D. Risk avoidance
Ask by Cummings Huang. in the United States
Mar 26,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Risk transfer describes insuring a risk against possible loss.
Solution
The act of insuring a risk against possible loss is best described by:
B. Risk transfer
Risk transfer involves shifting the financial burden of a potential loss to another party, typically through insurance.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution The Deep Dive
Risk transfer refers to the process of shifting the financial burden of a potential loss from one party to another, typically through insurance. When you purchase insurance, you essentially transfer the risk of certain financial losses to the insurance company, so if a loss occurs, they bear the cost.
In practice, businesses use risk transfer to protect their assets and ensure that unexpected events don’t derail their operations. For example, a small bakery might insure its equipment against fire damage, meaning that if a fire occurs, the insurance will cover the replacement costs instead of leaving the bakery to shoulder the entire financial hit.
