General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which of the following is an example of a pure risk?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An unexpected illness is a pure risk because the only financial outcomes are loss or no loss — the insured cannot gain from being sick. Pure risks are the proper subject of insurance because they meet the fortuity and indemnity requirements: the insurer restores the insured's loss without creating a chance of profit. By contrast, investments, wagers, and business ventures carry the possibility of gain, making them speculative risks that insurance does not cover.
Why the other options are wrong
- B) An investment carries the chance of both gain and loss, which makes it a speculative risk, not a pure risk.
- C) A wager offers the possibility of financial gain, so it is a speculative risk and is not insurable.
- D) A business venture involves the opportunity to profit, which makes it speculative rather than a loss-only pure risk.
Memory hook
Pure risk = lose or break even only. Illness qualifies; investments and bets do not.