A situation in which a person can experience only a loss and no gain presents what type of risk?

• A. Pure Risk
• B. Speculative Risk
• C. Hazard Risk
• D. Fundamental Risk

Answer: (A)

This question hinges on how risks are classified by outcomes. A situation where only a loss is possible, with no chance of any gain, is pure risk. In pure risk, the possible outcomes are either a loss or no loss, and there is no upside to gain anything. That’s the type insurers focus on, because it can be transferred or compensated through insurance. By contrast, speculative risk involves both potential loss and potential gain (like investing in the market), which is not typically insurable. Hazard risk describes conditions that increase the likelihood of a loss but doesn’t define the outcome itself, and fundamental risk refers to events that affect a large number of people. So the scenario described fits pure risk.