Which term describes a situation in which the only outcomes are loss or no loss?

Which term describes a situation in which the only outcomes are loss or no loss?

• A. Risk
• B. Occurrence
• C. Peril
• D. Pure risk

Answer: (D)

In risk management, a situation where the outcomes are only loss or no loss is described as pure risk. Pure risk means there’s no possibility of a gain from the event itself—you either suffer a loss or nothing happens. This is the type of risk that insurance typically covers, such as damage from a fire or a natural disaster where you could incur a loss or avoid one entirely. Peril is the specific cause of loss (like fire or flood), not the overall type of risk. Occurrence isn’t the classification used here. By contrast, speculative risk involves both potential gain and potential loss, such as investing, where outcomes can include up or down gains. So the best term for a situation with only loss or no loss is pure risk.

In risk management, a situation where the outcomes are only loss or no loss is described as pure risk. Pure risk means there’s no possibility of a gain from the event itself—you either suffer a loss or nothing happens. This is the type of risk that insurance typically covers, such as damage from a fire or a natural disaster where you could incur a loss or avoid one entirely.

Peril is the specific cause of loss (like fire or flood), not the overall type of risk. Occurrence isn’t the classification used here. By contrast, speculative risk involves both potential gain and potential loss, such as investing, where outcomes can include up or down gains. So the best term for a situation with only loss or no loss is pure risk.