What term describes the act of insuring a risk against possible loss?

The act of insuring a risk against possible loss is best described as risk transfer. This concept involves shifting the financial burden of a potential loss from an individual or organization to an insurance company. By purchasing insurance, the insured party pays a premium in exchange for the insurer's obligation to cover specific types of losses outlined in the policy. This effectively transfers the risk of financial loss from the insured to the insurer, allowing the policyholder to have protection against adverse events.

In the context of the other terms, risk avoidance refers to strategies that completely eliminate the risk, such as not engaging in activities that may lead to a loss. Hazard reduction involves minimizing the potential severity of a risk but does not necessarily involve financial protection against losses. Loss management refers to strategies that organizations employ to handle risks after they occur, which may include mitigation, response, and recovery efforts, rather than the proactive step of obtaining insurance to cover potential losses.