Which of the following situations exemplifies risk transfer?

The situation that exemplifies risk transfer is a business purchasing liability insurance. This action involves transferring the financial risk associated with potential liabilities—such as injuries to third parties, property damage, or legal defense costs—away from the business and onto the insurance company. By paying premiums, the business secures coverage that will indemnify it in the event of a covered loss, effectively shifting responsibility for those risks to the insurer.

In other scenarios, while there may be elements of risk management, they do not represent the same concept of risk transfer. For instance, a homeowner paying a deductible after a loss does not transfer risk; rather, it highlights the homeowner's retained exposure to some degree of loss. The deductible represents the portion of risk that remains the homeowner's responsibility.

An investor diversifying their portfolio is a strategy aimed at reducing risk rather than transferring it. Diversity can decrease the impact of poor performance in any single investment but does not shift risk to another party.

Signing a lease as a tenant involves agreeing to certain terms and responsibilities regarding the property but does not represent a method of transferring risk. Instead, the tenant assumes the risks associated with the use of the leased property, even if there are some protections built into the lease terms.

Therefore, purchasing liability insurance