Which statement best represents risk transfer via an insurance policy?

• A. Self-insure without policy
• B. Decrease insurance premiums
• C. Shift insurable risk to an insurer via policy
• D. Eliminate risk entirely

Answer: (C)

Risk transfer through an insurance policy happens when you move the potential financial loss from yourself to an insurer by paying a premium. The insurer agrees to cover defined losses, up to policy limits, so the financial burden is shifted away from you. This is why the idea described is shifting insurable risk to an insurer via the policy. Self-insuring keeps the risk on you, trying to lower premiums isn’t about transferring risk, and eliminating risk entirely isn’t feasible—insurance provides protection for covered events, not a guarantee of zero loss.