What is "insurance" in the context of risk management?

In the context of risk management, insurance serves as a financial mechanism that protects against potential losses, making this option the most accurate. It functions by transferring the financial risk of certain events or incidents from the individual or organization to an insurance company. This means that when a health care institution faces unexpected costs due to accidents, malpractice claims, or other liabilities, the insurance coverage can help mitigate those financial burdens, ensuring that the institution can continue to operate effectively without suffering catastrophic losses.

This financial protection is essential in the health care sector, where the potential for significant liability and costs can be quite high. By managing risk through insurance, health care institutions can maintain stability while also being better positioned to focus on patient care and other organizational goals without the constant threat of financial ruin from unforeseen events.