What is the term for the type of risk that involves no possibility of gain, only a loss or no loss?

• A. Risk, Speculative
• B. Risk, Pure
• C. Risk Retention
• D. Risk Reduction

Answer: (B)

The term that describes a type of risk involving only the possibility of loss or no loss, with no potential for gain, is known as "Pure Risk." Pure risk pertains to situations where the outcomes are limited to adverse outcomes or neutral outcomes, meaning that either a loss occurs or there is no event at all, thus ruling out scenarios that could lead to a profit. Examples of pure risk include natural disasters, accidents, and health-related issues.

In contrast, speculative risk includes scenarios where there is potential for both gain and loss, such as investing in the stock market or starting a new business. This distinction is crucial in the insurance industry, where companies typically cover pure risks to mitigate losses for insured parties. Understanding this classification helps in identifying what types of risks can be insured and how to manage them effectively.