Which of the following best describes risk transfer?

Risk transfer is a concept in insurance and risk management where an individual or organization shifts the financial burden of potential loss to another party, typically an insurance company. When a person purchases insurance, they are effectively transferring the risks associated with certain adverse events, such as accidents, to the insurer. This arrangement allows the insured individual to protect themselves against significant financial losses that could arise from unforeseen incidents.

In this scenario, purchasing insurance means that if an accident occurs, the insurance company will cover the financial costs up to the limits of the policy. This alleviates the worry of facing a potentially catastrophic financial setback from accidents, thus exemplifying risk transfer clearly.

The other options reflect different approaches to risk management rather than outright risk transfer. Taking on all risks with no insurance means retaining risk rather than transferring it. Choosing to park a car instead of driving suggests avoidance of risk, not transfer. Following safety regulations involves risk mitigation but does not transfer the risk itself. Each of these actions serves a purpose in managing risk, but they do not embody the principle of transferring risk to another party like purchasing insurance does.