What term describes the planned assumption of risk through self-insurance?

The term that describes the planned assumption of risk through self-insurance is retention. In the context of insurance and risk management, retention involves an organization or individual consciously deciding to accept and manage certain risks internally, rather than transferring those risks to an insurance provider. This means setting aside funds or resources to cover potential losses when they occur, rather than purchasing an insurance policy to transfer that risk to another party.

Retention can be a strategic choice for entities that have the financial capacity to absorb risks, particularly when the cost of insurance may surpass the expected losses from such risks. By utilizing self-insurance, businesses can maintain greater control over their risk management strategies and potentially save on insurance premiums.

In summary, retention is about taking responsibility for certain risks and having a plan in place to manage potential losses without relying completely on external insurance. This concept is integral for organizations that seek to balance risk with financial prudence.