Claims Adjuster Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The methods of handling pure risk are key strategies that help individuals and organizations manage the potential negative impacts of uncertainties. The correct answer highlights the four fundamental approaches: transferring, reducing, retaining, and avoiding risk.

Transferring risk entails shifting the burden of the loss to another party, often through insurance. This provides financial protection against losses by distributing the risk among a larger group.

Reducing or mitigating risk involves implementing strategies to decrease the likelihood or the impact of a loss. This can include safety measures, training, and loss prevention strategies aimed at minimizing potential losses.

Retaining risk is the decision to accept the consequences of a risk when the costs to transfer or reduce it are higher than the potential loss itself. This method may be suitable for minor risks where the organization is willing to absorb the impact.

Avoiding risk means completely eliminating the activities or situations that introduce the risk, thus removing potential losses altogether.

Each of these methods plays a critical role in comprehensive risk management, ensuring that organizations can effectively safeguard against the uncertainties inherent in their operations.