Which of the following best describes pure risk?

Pure risk is characterized as the possibility of loss without any opportunity for gain. This form of risk typically involves situations where only negative outcomes can occur, such as accidents, natural disasters, or death. In contrast to speculative risk, which can involve both potential gains and losses (like investments in stocks or business ventures), pure risk does not offer any possibility of making a profit, only the chance of suffering a loss.

This distinction is crucial in insurance and risk management since pure risk is insurable, allowing individuals or organizations to protect against potential losses through various insurance products. Understanding pure risk helps in assessing the need for coverage and in determining appropriate risk management strategies.