General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A person with a family history of diabetes faces the chance of developing the disease and incurring medical expenses, or remaining healthy. This situation involves a:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The situation offers only two outcomes: the person develops diabetes and suffers a loss, or remains healthy and suffers no loss. There is no chance of financial gain, so it is a pure risk, the only type of risk insurance is designed to handle. This is why family history is a relevant underwriting consideration for health coverage.
Why the other options are wrong
- B) A speculative risk includes a chance of gain; developing diabetes offers no possibility of profit.
- C) A moral hazard is dishonesty that increases loss, such as exaggerating symptoms, not a disease risk.
- D) A warranty is a contractual promise in the policy, not a risk characteristic.
Memory hook
Pure risk = loss or nothing. Diabetes risk has no upside, so it is insurable.