Auto insurance in Georgia from www.georgiacarinsurancequotes.net is definitely an example of what would be considered a pure risk in 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 from the situation. For example, a desire for real or personal property subjects the 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 a similar character. The essence of the pure risk would be that the unfavorable event will occur or it will not. Accordingly, the danger is designated as pure.
Human life itself is also exposed to undesirable contingencies. These relate essentially towards the loss of income caused by premature death; illness and/or disability; indigenous old age; or general economic losses as a result of unemployment. Fundamental essentials primary risks affecting human life values that could or may not cause a loss and therefore constitute pure risk situations.
Pure risks are identified for purposes of risk management and insurance as: (1) property risks; (2) personal risks, and (3) liability risks. A fourth risk category is a that arises out of the failure of third party performance. It is considered at length in Chapter XVII.
Speculative risks pertain to the risk 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 notice a rise or decline within their selling price, or the price may remain constant. The same is true regarding other types of investments and commercial ventures in general. The potential of success, failure, or a break-even operation embodies a degree of uncertainty which 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 a few instances the individual would be lured to use his insurance to make a profit that they would not otherwise earn even without the insurance.