Insurance replaces the uncertainty of risk with a guarantee that reduces the adverse effects of risk.
Risk can be defined as the "uncertainty regarding a loss." Losses, such as auto damage due to an accident or negligence regarding your property, can give rise to a liability risk. The loss involved with these risks is the lessening or disappearance of value.
Insurance companies have the right to deny insurance, or issue you a non-standard policy if they decide that your situation poses a risk too high for their definition of standard risk.
The law that requires an insurance company to reveal the source of any third-party information that caused it to deny or issue a nonstandard policy is known as The Fair Credit Reporting Act.
1. Speculative Risks involve the chance of either gain or loss.
For example, buying a lot for $4,500 and hoping to sell it for at least $6,000, is considered speculation and therefore, uninsurable. Buying into the market, at what is hoped to be low and selling high later, could result in gain and therefore, is uninsurable.
2. Pure risks involve, only the chance of loss.
For example, accidental injury, a fire in the garage and a debilitating illness have only the chance for loss and are therefore, insurable.
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Would insuring one's car be a Pure or a Speculative risk ?
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Would insuring one's car be a Pure or a Speculative Risk ?
Ans. Pure Risk.
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