Taking out insurance in relation to risk management is called what?

The correct answer is A. Transference. Transference (A) is correct because taking out insurance transfers the financial burden of a risk to a third party (the insurer) - you still face the risk, but someone else absorbs the loss. Avoidance (B) means eliminating the risk entirely by not engaging in the activity at…

Risk Management

Question

Options

ATransference
BAvoidance
CExploring
DMitigation

How the community answered

(35 responses)

A
71% (25)
B
14% (5)
C
9% (3)
D
6% (2)

Explanation

Transference (A) is correct because taking out insurance transfers the financial burden of a risk to a third party (the insurer) - you still face the risk, but someone else absorbs the loss.

Avoidance (B) means eliminating the risk entirely by not engaging in the activity at all (e.g., not driving to avoid car accidents). Mitigation (D) means reducing the probability or impact of a risk through preventive measures (e.g., installing a sprinkler system). Exploring (C) is not a recognized risk management strategy - it's a distractor with no standard definition in this context.

Memory tip: Think of insurance as transferring your problem to someone else - you pay a premium, and they carry the financial risk. The word "transfer" maps directly to "transference."

Topics

#risk transference#insurance#risk response strategies

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