All of the following are potential advantages of retention EXCEPT
A)lower expenses.
B)increased cash flow.
C)encouragement of loss prevention.
D)protection from catastrophic losses.

Question

Quizplus · Accepted Answer

Protection from catastrophic losses is not an advantage of retention. Retention involves an organization or individual assuming the financial risk of loss, rather than transferring that risk to an insurance company. This strategy can lead to lower expenses, increased cash flow, and encouragement of loss prevention measures because the entity retains the risk. However, it does not protect against catastrophic losses, as these can far exceed the entity's ability to pay, which is why insurance or other risk transfer mechanisms are typically used for such risks.

All of the Following Are Potential Advantages of Retention EXCEPT