Question 36

Only pure risks are insurable.

Insurable risks are typically those that can be quantified and are associated with potential loss. Pure risks, which involve only the possibility of loss without the chance of gain, are the types of risks that insurance is designed to cover.

A) Only pure risks are insurable.

This statement is correct because insurance policies are structured to cover pure risks, such as damage to property or liability claims, where the outcome is solely negative. Insurers assess these risks to determine premiums and coverage options, making them suitable for insurance.

B) Only speculative risks are insurable.

This statement is incorrect as speculative risks involve both the possibility of loss and the potential for gain, like investing in stocks. Insurance does not cover speculative risks because they are inherently uncertain and involve personal choice rather than unforeseen events.

C) Both pure and speculative risks are insurable.

This statement is false. While pure risks can be insured, speculative risks cannot be insured by traditional insurance providers, as they are based on chance and investment decisions rather than loss prevention or mitigation.

D) Neither pure nor speculative risks are insurable.

This statement is also incorrect. Pure risks are insurable and are the foundation of insurance, while speculative risks are not covered. Thus, asserting that neither type is insurable fundamentally misunderstands the nature of insurance.

Conclusion

The assertion that only pure risks are insurable is definitive and accurate, as it aligns with the basic principles of insurance. All other options misrepresent the nature of risk and the scope of insurance coverage, emphasizing the importance of understanding the distinct characteristics of pure versus speculative risks.