Ace the 2025 Life & Health Insurance Exam – Insure Your Success Today!

The correct answer is Pure Risk. This type of risk is characterized by situations where there are only two possible outcomes: either a loss occurs or nothing happens. In other words, pure risk presents the potential for loss without any chance of profit or gain. This can include risks such as natural disasters, theft, or accidents—events that can result in damage or loss without providing any opportunity for a financial gain.

In contrast, speculative risk involves situations where there is a potential for both loss and gain, such as investing in the stock market. Operational risk pertains to losses that arise from failures in internal processes or systems, including technology failures or human errors. Dynamic risk refers to risks associated with changes in the overall environment, which could potentially lead to uncertain outcomes but includes the possibility of both positive and negative results. By understanding pure risk, individuals and organizations can better evaluate and manage risks that are strictly associated with losses.