CMFAS BCP Risks & Insurance question: pure and speculative risk

CMFAS BCPRisks & Insurance

Which statement about pure and speculative risk is CORRECT?

A Speculative risks are generally insurable because they involve a chance of gain
B Pure risks always involve the possibility of profit
C Pure risks involve loss or no loss and are generally insurable
D Speculative risks have only two possible outcomes

Show the answer and explanation

Answer: C. Pure risks involve loss or no loss and are generally insurable

Pure risks (loss or no loss, no gain) are generally insurable. Speculative risks (loss, no change, or gain) are generally uninsurable because of the profit element. Pure risks never involve profit, and speculative risks have three possible outcomes.

Common mistake

The other three options each invert a defining feature of pure vs speculative risk.

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CMFAS BCP Risks & Insurance question: pure and speculative risk

Answer: C. Pure risks involve loss or no loss and are generally insurable

Common mistake

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CMFAS BCP Risks & Insurance question: pure and speculative risk

Answer: C. Pure risks involve loss or no loss and are generally insurable

Common mistake

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