General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A speculative risk is best characterized by which of the following?
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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 both gain and loss — such as stock ownership, a business venture, or a wager. Because the insured could profit from the outcome, speculative risks fail the fortuity and indemnity requirements that define insurable pure risks. Insurance is designed to restore losses, not to create a profit motive, which is why speculative risks are generally excluded from coverage.
Why the other options are wrong
- B) The possibility of loss only, with no chance of gain, is the definition of a pure risk, not a speculative risk.
- C) A loss certain to occur is not a risk at all; risk requires uncertainty about whether the loss will happen.
- D) Insurance is the transfer mechanism for pure risks; speculative risks are not handled through insurance.
Memory hook
Speculative = win or lose, both on the table. Pure = lose or break even only.