Idaho Property and Casualty Practice Exam 2025 - Free Practice Questions and Study Guide

"Pure risk" in insurance refers specifically to situations where there is a potential for loss or no loss, without any opportunity for gain. This means that the outcomes are limited to either a negative result (such as a loss) or no change at all, as opposed to being able to also gain something positive.

In the context of insurance, examples of pure risks include events such as theft, fire damage, or liability claims, where the only possible outcomes involve financial loss or no loss occurring. This fundamental understanding is crucial for both insurance providers in assessing risk and potential policyholders when evaluating coverage options.

The other options align with various aspects of risk but do not accurately define "pure risk." For example, investment opportunities inherently involve the potential for gain, which does not fit the definition of pure risk. Similarly, while natural disasters can present risks that could result in loss, the term "pure risk" categorically includes only scenarios without a chance for financial gain.