Risk transfer is best described as what?

• A. Share risk evenly among employees.
• B. Shift insurable risk to an insurance company via policy.
• C. Eliminate risk completely.
• D. Increase risk to gain rewards.

Answer: (B)

Risk transfer means moving the financial burden of a potential loss from yourself to someone else who can bear it, typically an insurer. An insurance policy is the classic tool for this: you pay a premium, and the insurer takes on the risk of covered losses, paying out up to the policy limits when a defined event occurs. That’s why describing the shift of insurable risk to an insurance company via a policy is the best fit. The other ideas don’t match: sharing risk among employees isn’t transferring to a separate party, eliminating risk completely isn’t realistic even with insurance, and increasing risk to gain rewards is the opposite of risk transfer.