Noninsurance transfers are various methods other than insurance by which a pure risk and its potential financial consequences can be transferred to another party, for example, contracts, leases, and hold-harmless agreements.
“A noninsurance transfer is the transfer of risk from one person or entity to another by way of something other than a policy of insurance.” Generally, the methods used include indemnity, insurance provisions, and hold harmless in contracts. These transfers are also known as contractual risk transfers.
Noninsurance transfers indicate shifting risks to someone else. For example, using health insurance transfers risk since the financial risks related to healthcare are transferred from the person to the insurer.
The most common and simplest method of risk transfer is the buying of an extended warranty on a product by a customer. Here, the extended warranty means a contract transferring a defective product’s risk from the purchaser to the seller or manufacturer.
Sometimes, construction businesses also use noninsurance transfers of risk.
Use of the term in Sentence:
- The professor is discussing the noninsurance transfers of risk in the class and has also assigned an assignment on it which is to be submitted in the next class.
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