Question

which type of risk management strategy would include purchasing life insurance?
reducing risk
transferring risk
avoiding risk
retaining risk

Explanation:

To determine the correct risk management strategy for purchasing life insurance, we analyze each option:

• Reducing risk involves actions to lower the probability or impact of a risk (e.g., safety measures), which is not what life insurance does.
• Transferring risk means shifting the risk to another party. When you buy life insurance, the insurance company takes on the financial risk associated with your death (providing a payout to your beneficiaries), so this matches.
• Avoiding risk means steering clear of activities that pose the risk (e.g., not investing in a risky venture), which is not related to insurance.
• Retaining risk means accepting the risk and its potential consequences (e.g., self - insuring for a small expense), which is not what life insurance is about.

Answer:

B. transferring risk