What term describes the potential loss that an individual faces when investing in insurance coverage?

Risk exposure refers to the potential loss an individual may face regarding their insurance coverage. It encompasses all the risks that an individual is subject to that could lead to financial loss. When someone invests in insurance, they are generally aiming to protect themselves from these potential losses. Risk exposure involves assessing and identifying the various factors that could lead to a claim or a need for compensation, making it a fundamental concept in insurance and risk management.

This term is crucial in understanding how insurance works, as it highlights the importance of evaluating what risks one is willing to bear and which ones they want to transfer to an insurance company. By accurately identifying their risk exposure, individuals can opt for insurance policies that appropriately cover their specific needs and vulnerabilities.