General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When an individual buys a health insurance policy, the financial risk of large medical bills is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Purchasing insurance is the classic example of risk transfer: the insured pays a premium and the insurer assumes the financial burden of covered losses. The individual still faces the risk of illness, but the financial consequences of large medical bills shift to the insurer. This is the most common way individuals and families handle the loss exposure of healthcare costs.
Why the other options are wrong
- B) The insured retains only the deductible, copays, and non-covered costs; the bulk of risk transfers to the insurer.
- C) The risk of illness itself is not avoided; only the financial consequences are transferred.
- D) Insurance deals with pure risk; it does not convert the situation into a speculative one.
Memory hook
Premium buys a transfer: the illness stays, the bill moves to the insurer.