QS Study

“Pure risks are always insurable”

A situation where there is a chance of either loss or no loss, but no chime of gain; for example either a building will burn down or it won’t. Only pure risks are insurable because otherwise (where the chalice of the occurrence of kiss is determinable) insurance is akin to betting and the insured may stand to gain from it a situation contrary to the most fundamental concept of insurance. Also called absolute. They are pure in the sense that they do not mix both profits and losses. Insurance is concerned with the economic problems created by pure risks. Speculative risks are not insurable.

Pure risk is the risk, where none can think 100% profit or gain-gain situation. Speculative risk is contracting means that here one can think the gain-gain situation. Both speculative risk and pure risk involve the chance of loss. However, speculative risk also involves the possibility of gain as well – even if there is no loss. In order to understand why you will need to understand the difference between the two. So in conclusion, we can say that speculative risks are the further than of range of insurance pure risk which is death with by insurance method is the risk management from insurance e point of view therefore only pure risks are insurable.

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