what is pure risk

Pure risk refers to a type of risk that cannot be controlled and has only two possible outcomes: complete loss or no loss at all. It is also known as absolute risk and is prevalent in situations such as natural disasters, fires, or death, which cannot be predicted and are beyond anyones control. Pure risk is the opposite of speculative risk, which poses the opportunity to either gain or lose. There are no opportunities for gain or profit when pure risk is involved. Pure risks can be divided into three different categories: personal, property, and liability. Many instances of pure risk are insurable, and individuals transfer part of a pure risk to an insurer by purchasing insurance coverage for the potential loss, which transfers the risk to an insurance company. Risk managers deal with pure risk in four basic ways: they reduce risk, avoid risk, accept it, or transfer it.