What Does Risk Transfer Mean?
A risk transfer occurs when one party pays a certain amount of money to another party in exchange for the second party taking on a risk from them.
The insurance business is built on risk transfer: by purchasing an insurance policy, the policyholder transfers risk to an insurer.
Insuranceopedia Explains Risk Transfer
People often buy insurance and participate in risk transfer when they believe that their particular risks will be too costly. Health care, for example, can be extremely expensive and difficult to manage personally, so many people purchase health insurance policies to help them manage these costs.