Risk management is central to all insurance. If an individual insuring himself, his family or his possessions, wishes to reduce the premium he pays for the peace of mind that insurance brings, he can do this by accepting high deductibles.
He must work to meet the total of his deductibles annually before any benefits are taken, and this is the main disadvantage. Expenses incurred must be met out if his own pocket until the deductible limit is reached. For instance, a high deductible health plan offers a much lower monthly premium payment in exchange for a higher annual deductible.
He may wager on his health being good, few doctors' visits or treatments, and therefore few out of pocket expenses. This risk management option is called Retention. Option A is therefore the choice to make.
Retention-answer a is correct. risks may be retained in whole or in part by intentionally self-insuring or selecting high deductibles. the other risk management options are not examples of risk reduction. transfer refers to the purchase of insurance, where the risk of loss is assumed by the insurance company in return for the premium. avoidance means taking steps to not incur the risk at all, such as never driving a car to avoid the risk of collision. reduction means taking steps to lower the severity of a loss if it occurs, such as installing a sprinkler systema fire might still occur, but it wont spread if the sprinkler system puts the fire out.