What term describes the process of transferring risk of loss from an individual to an insurance company?

The process of transferring the risk of loss from an individual to an insurance company is fundamentally known as insurance. This concept revolves around the principle that individuals or entities pay a premium to an insurance company in exchange for financial protection against certain risks, such as death, disability, or property loss.

When an individual purchases an insurance policy, they are essentially shifting the potential financial burden of a loss to the insurer. The insurance company then assumes this risk in return for the premiums collected, allowing policyholders to gain peace of mind knowing that they are financially safeguarded against unforeseen events.

This fundamental principle is at the core of how insurance operates, making it a vital component of risk management strategies for both individuals and businesses.