Which term describes the act of providing insurance to individuals or entities that risk severe financial loss?

The term that describes the act of providing insurance to individuals or entities that risk severe financial loss is underwriting. Underwriting involves evaluating the risks associated with insuring a person or entity and determining the appropriate premium to charge for that insurance. This process is crucial because it helps insurers assess whether they can afford to take on the risk presented and under what conditions they might do so.

Underwriting takes into account various factors, such as the individual's health, the value of the property being insured, and historical data about similar risks. By thoroughly analyzing these factors, underwriters can make informed decisions, ensuring that the insurance company remains financially stable while offering coverage to those who need it.

The other terms, while related to the insurance industry, do not specifically describe the act of providing insurance. Coverage refers to the protection provided by an insurance policy, ensuring that policyholders receive compensation in the event of a loss. Insurability relates to the susceptibility of an individual or entity to be insured, based on their risk profile. Risk management refers to strategies employed to mitigate risks, including loss prevention techniques and minimizing financial exposure. These terms capture important concepts within insurance but do not directly address the process of assessing and assuming risk that is central to underwriting.