General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
A bank employee embezzles funds from one customer's account, causing a loss to that customer alone. This type of risk is classified as a:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A particular risk is a risk that originates in an individual event and affects only specific persons or small groups — a house fire, a theft, a lawsuit against one business. Because such losses are scattered and independent, they fit the law of large numbers and are readily insurable. A fundamental risk, by contrast, affects large numbers of people simultaneously, such as war or widespread flood.
Why the other options are wrong
- B) Fundamental risks strike many people at once and are impersonal in origin; embezzlement against one customer is personal and localized.
- C) A speculative risk offers a chance of gain or loss; embezzlement presents only the possibility of loss.
- D) 'Societal risk' is not a recognized classification; the relevant distinction is particular versus fundamental.
Memory hook
Particular = one pocket gets picked. Fundamental = everyone gets picked at once. Particular risks are insurance's home turf.