Auto insurance in Georgia from http://www.georgiacarinsurancequotes.net/ is definitely an example of what would be described as a pure risk within the insurance business . A pure risk is one that relates to the chance of an economic loss or no loss. It’s distinguished totally on the net income and loss structure from the situation. For example, a desire for real or personal property subjects the dog owner to the risk the property is going to be damaged by windstorm; partially or totally destroyed by fire; or rendered useless directly or indirectly from perils of an identical character. The essence of a pure risk would be that the unfavorable event will occur or it won’t. Accordingly, the risk is designated as pure.
Human life itself is also exposed to undesirable contingencies. These relate essentially to the loss of income brought on by premature death; illness and/or disability; indigenous senior years; or general economic losses arising from unemployment. Fundamental essentials primary risks affecting human life values that could or might not cause a loss and hence constitute pure risk situations.
Pure risks are identified for purpose of risk management and insurance as: (1) property risks; (2) personal risks, and (3) liability risks. A fourth risk category is one that arises from the failure of third party performance. It’s considered at length in Chapter XVII.
Speculative risks have to do with the chance of an increase, a loss of revenue, or no loss. In other words, speculative risks might have favorable consequences. For example, investors in securities will either experience a rise or decline within their selling price, or the price may remain constant. This is also true with respect to other types of investments and commercial ventures generally. The potential of success, failure, or perhaps a break-even operation embodies a degree of uncertainty that is speculative in character.
The excellence between pure and speculative may be used to define insurable and uninsurable risks. Houston states that “pure risks become insurable since theoretically the person, at best, stands to break-even whichever outcome occurs. Conversely, speculative risks become uninsurable since in a few instances the person would be tempted to use his insurance to make a profit which he wouldn’t otherwise earn even without the insurance.