General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When an individual purchases a health insurance policy, the individual is primarily using which risk management technique?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Purchasing insurance is the classic example of risk transfer: the insured pays a premium and the insurer assumes the financial burden of covered losses. Transfer shifts the financial consequences of a risk to another party, which is exactly what a health policy does for medical expenses. The insured may still retain deductibles or copayments, but the primary technique being used is the transfer of the risk to the insurer in exchange for the premium.
Why the other options are wrong
- A) Avoidance means not engaging in the activity that creates the risk, which is not what buying insurance does.
- B) Retention means absorbing losses internally; the whole point of the policy is to shift them to the insurer.
- D) Loss prevention reduces the chance of loss; buying a policy does not reduce the chance of illness.
Memory hook
Buy insurance, and you hand the risk to the insurer.