General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which of the following is an example of a speculative risk?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A speculative risk offers the chance of gain or loss: the restaurant venture could succeed and profit or fail and lose money. Because a gain is possible, speculative risks are generally not insurable — insurance is built for pure risks, which offer only the chance of loss or no loss. Businesses and individuals nonetheless face speculative risks constantly, but they are handled through investment, not insurance.
Why the other options are wrong
- B) Illness offers only the chance of loss (medical bills) or no loss, making it a pure risk.
- C) A collision can only cause loss or no loss; there is no chance of financial gain, so it is a pure risk.
- D) Fire offers only loss or no loss and is a classic pure risk, fully insurable.
Memory hook
Speculative = win or lose. Insurance only plays games where you cannot win.