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

The term that best describes the act of insuring a risk against possible loss is "risk transfer." This concept refers to the process of moving the financial burden associated with a risk from one party to another, typically through the purchase of an insurance policy. When an individual or business takes out insurance, they effectively transfer the potential costs of a covered loss to the insurance company. In essence, by paying a premium, the insured party gains protection against financial losses that may arise from specified risks, allowing them to manage their exposure to potential hazards without bearing the full financial impact themselves.

In contrast, risk avoidance involves trying to eliminate the risk entirely, risk mitigation is about reducing the severity or likelihood of the risk, and risk assessment refers to the process of identifying and evaluating risks. While these concepts relate to handling risk, they do not specifically address the act of securing insurance as a means of transferring that risk.