What is risk transfer and what type of insurance coverage does it affect?

UPDATED: Jun 13, 2011

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UPDATED: Jun 13, 2011Fact Checked

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Asked June 13, 2011

1 Answer


In general, all insurance is a form of risk transfer. By definition, risk transfer occurs when the risks of injury, loss or damage are taken over by a third party to reduce the liability faced by the first party. In insurance, that means that your policy is used to transfer the risk from yourself to your insurance company, resulting in lower or no out of pocket expenses in the event that an insured incident takes place.

Risk is the name of the insurance game. Whether you are insuring a car, a home, your health, or purchasing a life insurance policy, you are transferring the risk of loss, damage or injury to the insurance company, paying monthly or yearly premiums to avoid having to pay the full cost of an accident out of pocket or leaving your loved ones without a safety blanket if you suddenly become deceased.

Answered June 13, 2011 by Anonymous

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