Insurance represents the process of risk
Options:
A) selection
B) avoidance
C) transference
D) assumption
The Correct Answer Is:
- C) transference
Insurance represents the process of risk transference. By transferring risk from an individual or organization to an insurance company, individuals and organizations can mitigate potential losses associated with potential risks. In many cases, insurance provides a financial cushion that enables individuals and organizations to absorb anticipated losses without having a significant effect on their day-to-day operations. Insurance is also beneficial because it creates a market for risk management, thereby encouraging prudent behavior.