CAPM Predictive Plan-Based Methodologies Practice Question
A project manager is planning risk responses for a high-impact, low-probability risk. The team decides to purchase an insurance policy to cover potential losses. Which risk response strategy is being used?
⚠ Common exam trap
CAPM often tests the confusion between Transfer and Mitigation; candidates might think insurance mitigates risk, but it actually transfers the financial impact.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Transfer
Purchasing an insurance policy to cover potential losses is an example of the Transfer risk response strategy. Transfer involves shifting the impact of a risk to a third party, such as an insurance company, without eliminating the risk itself.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
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Avoidance
Why it's wrong here
Avoidance eliminates the threat by removing its cause, such as cancelling the activity entirely; insurance leaves the risk in place and compensates losses. Avoidance tempts because it also addresses high-impact risks, and would be correct if the team dropped the risky work rather than insured it.
- ✓
Transfer
Why this is correct
Purchasing insurance shifts the financial consequence of the risk to a third party, which is the defining mechanism of transfer. It satisfies the stem's constraint of a high-impact, low-probability threat, where avoidance is impractical and mitigation cannot reduce the loss exposure itself. The risk remains, but its ownership moves to the insurer.
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Acceptance
Why it's wrong here
Acceptance acknowledges the risk without action or funding; purchasing a policy actively shifts the loss to the insurer. Acceptance tempts because it suits low-probability risks when the cost of any response outweighs the exposure, but here a response was actually funded and executed.
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Mitigation
Why it's wrong here
Buying insurance transfers the financial impact to a third party; mitigation reduces probability or impact through actions the team performs itself. Mitigation tempts because it also lowers impact, and would be correct if the team hardened systems or added redundancy instead of paying a premium.
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One of 451 original CAPM practice questions on Courseiva, each with a full explanation and wrong-answer analysis — not exam dumps or protected exam content. Learn why practice questions differ from exam dumps →
JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official PMI exam blueprint
This CAPM practice question is part of Courseiva's free PMI certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CAPM exam.