Question

One of the loss financing method is retention (also called self-insurance) in which business or individual retains the obligation to pay for part or all of the losses.

a)True
b)False

Answer 1

Retention, also known as self-insurance, is a loss financing method where a business or individual takes on the responsibility to pay for part or all of their losses instead of purchasing insurance.

Step-by-step explanation:

Retention, also known as self-insurance, is a loss financing method where a business or individual takes on the responsibility to pay for part or all of their losses instead of purchasing insurance. This means that they retain the obligation to cover the costs of any losses they may experience.

For example, a company may choose to self-insure against property damage. If a fire occurs and causes damage to their building, they will be responsible for covering the costs of repairing or rebuilding the property.

In this case, the statement is true. Retention is indeed a loss financing method where the business or individual retains the obligation to pay for part or all of the losses.