What does pure risk entail in an insurance context?

In an insurance context, pure risk refers exclusively to situations that involve the potential for loss without any possibility of gain. This is the defining characteristic of pure risk—it represents scenarios where the only outcomes can lead to a loss or no loss at all, but never a profit.

For example, consider risks related to fire, theft, or natural disasters. These are situations where a person or entity might suffer a loss (such as property damage) and does not have the opportunity to gain any benefit or profit from them. Insurance is primarily concerned with these pure risks, as it provides protection against potential losses.

Other options do not accurately represent the concept of pure risk. For instance, possible outcomes that include a chance of profit would imply a speculative risk, while leaving something "unrisked" indicates a situation that does not involve risk at all. Similarly, maximizing potential loss suggests an intention to incur as much loss as possible, which is contrary to the essence of pure risk where one seeks to mitigate loss rather than encourage it.