Question

As a risk management technique, which of the following best illustrates risk transfer?

A. Carol eats a healthy diet and exercises regularly, hoping that doing so will keep her healthy.
B. Sheila refuses to drink alcoholic beverages if she expects to drive a car afterward.
C. John refuses to buy life insurance because he figures he has enough money in his savings to pay for his burial when he dies.
D. Robert purchases life insurance because he figures doing so is far less expensive than trying to save all the money his survivors would need upon his death.

Answer 1

Option D best illustrates risk transfer as Robert purchases life insurance to transfer the risk of financial burden.

Step-by-step explanation:

Risk transfer is a risk management technique where an individual transfers the risk to another party, typically through insurance or contracts. In this case, the best illustration of risk transfer is option D. Robert purchases life insurance because it is less expensive than trying to save all the money his survivors would need upon his death. This means that Robert is transferring the risk of financial burden to the insurance company.