Auto insurance in Georgia from georgiacarinsurancequotes.net is definitely an example of what can be described as a pure risk within the insurance business . A pure risk is one that pertains to the chance of an economic loss or no loss. It is distinguished totally on the net income and loss structure of the situation. For example, an interest in real or personal property subjects the owner towards the risk that the property is going to be damaged by windstorm; partially or totally destroyed by fire; or rendered useless directly or indirectly from perils of a similar character. The essence of a pure risk is that the unfavorable event will occur or it won’t. Accordingly, the risk is designated as pure.
Human life itself is also exposed to undesirable contingencies. These relate essentially to the damages caused by premature death; illness and/or disability; indigenous senior years; or general economic losses arising from unemployment. These are the primary risks affecting human life values that may or may not result in a loss and hence 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 out of the failure of 3rd party performance. It is considered in detail in Chapter XVII.
Speculative risks have to do with the chance of an increase, a loss of revenue, or no loss. In other words, speculative risks may or may not have favorable consequences. For example, investors in securities will either experience a rise or decline within their selling price, or the price may remain constant. This is also true with respect to other types of investments and commercial ventures in general. The possibility of success, failure, or perhaps a break-even operation embodies a diploma of uncertainty which is speculative in character.
The excellence between pure and speculative enables you 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 individual would be lured to use his insurance to make a profit that they wouldn’t otherwise earn even without the insurance.