Pure risk is defined as:

Pure risk is defined as:

• A. Pure risk is defined as a situation where only loss or no loss can occur.
• B. Pure risk is defined as a risk with potential for gain.
• C. Pure risk is defined as a risk that has no uncertainty.
• D. Pure risk is defined as a guaranteed safe outcome.

Answer: (A)

Pure risk refers to situations where the outcomes are either a loss or no loss, with no possibility of financial gain from the risk itself. This is the type insurers typically address, because there’s uncertainty about whether a loss will occur, but there isn’t a potential upside tied to the risk. For example, property damage from a fire or medical expenses from illness involve possible loss, not a chance to gain money simply by the risk occurring. The other descriptions don’t fit: a risk with potential for gain is speculative risk; a risk with no uncertainty isn’t truly a risk; and a guaranteed safe outcome has no risk at all.

Pure risk refers to situations where the outcomes are either a loss or no loss, with no possibility of financial gain from the risk itself. This is the type insurers typically address, because there’s uncertainty about whether a loss will occur, but there isn’t a potential upside tied to the risk. For example, property damage from a fire or medical expenses from illness involve possible loss, not a chance to gain money simply by the risk occurring. The other descriptions don’t fit: a risk with potential for gain is speculative risk; a risk with no uncertainty isn’t truly a risk; and a guaranteed safe outcome has no risk at all.