The Purpose of Insurance and Risk Management

This lesson introduces the basic purpose of insurance: to help individuals and businesses manage financial uncertainty by transferring certain risks to an insurer. It distinguishes risk from loss, explains why not every risk is insurable, and shows how pooling, premiums, and claims work together.

Students will learn the core risk management methods tested on licensing exams, including avoidance, reduction, retention, sharing, and transfer. The lesson also connects these ideas to life and health insurance, where the covered risks often involve death, illness, injury, disability, longevity, and medical expenses.