Auto insurance in Georgia from quotes from georgiacarinsurancequotes.net is an illustration of what would be considered a pure risk within the insurance business . A pure risk is a that relates to the risk of an economic loss or no loss. It is distinguished primarily on the profit and loss structure of the situation. For example, a desire for real or personal property subjects the dog owner towards the risk the property will be damaged by windstorm; partially or totally destroyed by fire; or rendered useless directly or indirectly from possible risks with an identical character. The essence of the pure risk is that the unfavorable event will occur or it will not. Accordingly, the risk is designated as pure.
Human life is also exposed to undesirable contingencies. These relate essentially towards the damages caused by premature death; illness and/or disability; indigenous old age; or general economic losses arising from unemployment. Fundamental essentials primary risks affecting human life values that may or may not cause a loss and therefore 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 in detail in Chapter XVII.
Speculative risks pertain to the risk of an increase, a loss, or no loss. Quite simply, speculative risks may or may not have favorable consequences. For example, investors in securities will either notice a rise or decline within their market price, or even the price may remain constant. The same is true with respect to other kinds of investments and commercial ventures in general. The possibility of success, failure, or a break-even operation embodies a diploma of uncertainty that is speculative in character.
The distinction between pure and speculative may be used to define insurable and uninsurable risks. Houston states that “pure risks become insurable since theoretically the individual, at best, stands to break-even whichever outcome occurs. Conversely, speculative risks become uninsurable since in certain instances the person could be lured to use his insurance to create a profit which he would not otherwise earn in the absence of insurance.