General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A family decides not to purchase a motorcycle because they consider the crash risk unacceptable. This is an example of which risk management technique?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Avoidance is eliminating the risk by not engaging in the activity at all — declining to buy the motorcycle removes the loss exposure entirely. It is the most complete way to handle risk, though it is not always practical or desirable. Retention keeps the risk and absorbs losses, transfer shifts the risk to an insurer, and sharing divides risk among multiple parties. Forgoing a risky activity is the classic avoidance example.
Why the other options are wrong
- A) Retention means accepting the risk and absorbing losses; here the risk is eliminated, not accepted.
- B) Transfer shifts the financial burden to an insurer through a policy; no policy is involved in this scenario.
- D) Sharing spreads risk among a group, such as a risk pool; declining the activity is not sharing.
Memory hook
Avoidance = just say no. Refuse the motorcycle, refuse the risk.