What best describes pure risk?

Pure risk is defined as a situation where there is a chance of loss, but no opportunity for financial gain or benefit. This type of risk typically pertains to scenarios that can result solely in negative outcomes, such as accidents, natural disasters, or theft. In the context of insurance, pure risks are significant because they are insurable. For example, when a homeowner faces the risk of a fire damaging their property, there is only the possibility of loss, and no potential for gain from that risk itself.

The other definitions do not accurately capture the essence of pure risk. Situations that involve opportunities for gain along with the chance of loss are classified as speculative risks, which are fundamentally different from pure risks. Similarly, risks that are guaranteed to provide a financial gain contradict the nature of pure risk as they imply a benefit instead of solely a loss. Controlled risks that can be avoided may pertain to a different category of risk management and do not align with the specific characteristics that define pure risk.