What describes situations that can only result in a loss or no change; no opportunity for financial gain?

What describes situations that can only result in a loss or no change; no opportunity for financial gain?

• A. Risk
• B. Pure risk
• C. Policyowner
• D. Insurer

Answer: (B)

In insurance, a pure risk describes situations that can only result in a loss or no change, with no possibility of financial gain. This makes it the type of risk insurers are designed to cover, because the outcome is a loss that can be anticipated, measured, and indemnified, rather than something that could increase wealth. Examples include damage from a fire, theft of property, or sudden illness—events that don’t offer any upside. The more general term risk can include speculative scenarios where gain is possible, such as investing or starting a business. The other options aren’t about risk types: a policyowner is the person who owns the policy, and an insurer is the company providing coverage.

In insurance, a pure risk describes situations that can only result in a loss or no change, with no possibility of financial gain. This makes it the type of risk insurers are designed to cover, because the outcome is a loss that can be anticipated, measured, and indemnified, rather than something that could increase wealth. Examples include damage from a fire, theft of property, or sudden illness—events that don’t offer any upside. The more general term risk can include speculative scenarios where gain is possible, such as investing or starting a business. The other options aren’t about risk types: a policyowner is the person who owns the policy, and an insurer is the company providing coverage.