Which option illustrates a non-insurance risk transfer technique?

Which option illustrates a non-insurance risk transfer technique?

• A. Purchasing an insurance policy
• B. Installing stronger safety features
• C. Entering into a hold-harmless agreement with another party
• D. Selecting lower-risk alternatives

Answer: (C)

Non-insurance risk transfer relies on contracts that shift the financial responsibility for potential losses to another party rather than paying a premium to an insurer. A hold-harmless (indemnification) agreement does exactly that by having one party agree to assume the liability and defend or cover losses for the other party if something goes wrong. This is a contractual way to allocate risk without purchasing insurance. This differs from buying an insurance policy, which transfers risk to an insurer in exchange for premiums. It also differs from reducing risk through stronger safety features or choosing lower-risk alternatives, which are about lowering the chance or impact of a loss rather than shifting who bears the cost.

Non-insurance risk transfer relies on contracts that shift the financial responsibility for potential losses to another party rather than paying a premium to an insurer. A hold-harmless (indemnification) agreement does exactly that by having one party agree to assume the liability and defend or cover losses for the other party if something goes wrong. This is a contractual way to allocate risk without purchasing insurance.

This differs from buying an insurance policy, which transfers risk to an insurer in exchange for premiums. It also differs from reducing risk through stronger safety features or choosing lower-risk alternatives, which are about lowering the chance or impact of a loss rather than shifting who bears the cost.