Texas All Lines Adjuster Practice Test

What describes pure risk in insurance terms?

1. Risk that promises a financial gain

2. Risk that can result only in loss or no loss

3. Risk that involves speculative investments

4. Risk associated with great financial opportunities

The correct answer is: Risk that can result only in loss or no loss

Pure risk refers to situations that present only the possibility of loss or no loss, with no potential for financial gain. This type of risk is generally insurable because it is predictable and can be calculated, allowing insurance companies to assess and manage it effectively. Examples of pure risk include potential losses from natural disasters, accidents, or theft. In contrast, the other options describe risks that involve potential gains or speculative elements, which are not characteristic of pure risk. By focusing on outcomes that are limited to loss or unaffected status, pure risk gives both insurers and policyholders a clear understanding of the scenarios being insured against.