General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which situation presents a 'risk of possible loss' as the term is understood in insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A risk of possible loss involves uncertainty: a loss may or may not occur, and the timing is unknown. A driver facing a possible collision next year is a classic example — the event is contingent and fortuitous. Insurance exists to address exactly this kind of uncertain, accidental loss rather than certain events, already-occurred losses, or events entirely within the insured's control.
Why the other options are wrong
- B) A guaranteed bonus is a certain future benefit, not a possible loss; there is no uncertainty of loss.
- C) A paid-off mortgage removes a debt exposure, but that alone does not create a risk of possible loss; the question asks which situation presents such a risk.
- D) Bankruptcy that has already been declared is an occurred loss, not an uncertain future possibility.
Memory hook
Possible loss = 'might happen.' Guaranteed = not a risk. Already happened = not a risk either.