General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which statement correctly distinguishes a pure risk from a speculative risk?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A pure risk involves only the possibility of loss or no loss — for example, fire destroying a home. A speculative risk involves the possibility of gain or loss — for example, gambling or investing in a business. Insurance is designed to handle pure risks, because a speculative risk's chance of gain would violate the requirement that insurable losses be fortuitous.
Why the other options are wrong
- B) This reverses the definitions: speculative risks carry a chance of gain, pure risks do not.
- C) Measurability relates to the law of large numbers, not to the pure-versus-speculative distinction.
- D) It is pure risks that are generally insurable; speculative risks such as business ventures typically are not.
Memory hook
Pure = only lose or break even. Speculative = win or lose. Insurance only plays games where you cannot win.