1. Buying a life insurance policy is an example of which method of handling risk?

Transfer

Insurance transfers the financial risk of premature death from the insured to the insurer.

2. Choosing not to engage in an activity so its risk never arises is:

Avoidance

Avoidance eliminates the exposure by not undertaking the risky activity.

3. Paying small, expected losses out of one's own funds is the technique of:

Retention

Retention means self-funding a portion of risk rather than transferring it.

4. Which is a characteristic of an ideally insurable risk?

The loss is definite, measurable, and due to chance

Insurable risks involve fortuitous, measurable losses that are not catastrophic to the entire pool simultaneously.