Certified Professional in Health Care Risk Management (CPHRM) 2025 – 400 Free Practice Questions to Pass the Exam

Insurance primarily facilitates risk management by reducing financial loss through the transfer of risk from an individual or organization to the insurance provider. When a person or entity purchases insurance, they are essentially paying a premium to transfer the burden of potential losses associated with certain risks to the insurer. In the event of an incident that results in a loss, the insurance policy helps cover the associated costs, thereby alleviating the financial impact on the insured.

This mechanism is crucial in not only helping individuals or businesses manage unforeseen losses but also in promoting economic stability and providing peace of mind. The insurance structure allows policyholders to share risks among a larger pool of insured parties, which helps to minimize their financial exposure in the face of adverse events.

In contrast to other options, insurance does not increase risk exposure or guarantee full recovery for all losses. Additionally, it does not eliminate the possibility of risk; rather, it provides a financial safety net that helps manage or mitigate the consequences of such risks when they occur.