What is the process of transferring risk to an insurance company called?

Transferring risk to an insurance company is known as insurance. This process involves an individual or business paying premiums to an insurance company in exchange for financial protection against specific potential losses. By purchasing insurance, policyholders effectively shift the financial burden of certain risks—such as accidents, property damage, or liability—away from themselves and onto the insurer. This allows them to manage their risk more effectively, illustrating how insurance works as a financial safety net.

In this context, "assumption" refers to the acceptance of risk rather than transferring it. "Hedging" typically relates to financial strategies used to offset potential losses in investments, not specifically about transferring risk to an insurer. "Endorsement" refers to an amendment or addition to an insurance policy that changes its terms or coverage, rather than the process of transferring risk itself. Understanding these distinctions reinforces the concept that the essence of insurance is the contractual transfer of risk from an individual or organization to an insurance provider.