What is pure risk?

What is pure risk?

• A. The chance of gain with no possibility of loss
• B. The only type of risk considered by investors
• C. The chance of loss without the opportunity for gain
• D. A type of liability coverage

Answer: (C)

Pure risk refers to situations that involve only the possibility of loss or no loss, with no potential for profit or gain. This means that in the context of pure risk, individuals or entities may experience negative outcomes such as damage to property, injury, or other adverse events, but they do not stand to gain from these situations. It is typically associated with uncontrollable events, such as natural disasters or accidents, where the focus is solely on the potential for loss. In contrast to speculative risks, which include both the chance of gain and loss (such as investments in stocks), pure risk is strictly concerned with adverse outcomes. This definition aligns well with the concept described in the correct answer. Therefore, understanding pure risk is essential in the fields of insurance and risk management, where the emphasis is often placed on mitigating potential losses through various strategies and insurance products.

Pure risk refers to situations that involve only the possibility of loss or no loss, with no potential for profit or gain. This means that in the context of pure risk, individuals or entities may experience negative outcomes such as damage to property, injury, or other adverse events, but they do not stand to gain from these situations. It is typically associated with uncontrollable events, such as natural disasters or accidents, where the focus is solely on the potential for loss.

In contrast to speculative risks, which include both the chance of gain and loss (such as investments in stocks), pure risk is strictly concerned with adverse outcomes. This definition aligns well with the concept described in the correct answer. Therefore, understanding pure risk is essential in the fields of insurance and risk management, where the emphasis is often placed on mitigating potential losses through various strategies and insurance products.