Pure risks are types of risk where no profit is possible, and only full loss, partial loss, or break-even situations are probable outcomes. Types of pure risks are;
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- personal risks,
- property risks, and
- liability risks
Pure risks are types of risk where no profit or gain is possible, and only full loss, partial loss, or break-even situations are probable outcomes. There are three types of pure risk.
The result is always unfavorable, or maybe the same situation (as existed before the event) has remained without giving birth to a profit (or loss). Pure risk is a situation that holds out only the possibility of loss or no loss or no loss.
For example, if you buy a new Samsung Note 7, you face the prospect of the book being stolen or not being stolen and no profit from this situation.
There is only the prospect of loss or no loss and no prospect of gain or profit under pure risk.
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Since pure risks are generally insurable, the discussion on risk is skewed towards pure risks only.
These are the risks that directly affect the individual’s capability to earn income. Personal risks can be classified into the following types:
These are the risks to the persons in possession of the property being damaged or lost. The immovable land and building are damaged due to flood, earthquake, or fire, and the movable, like appliances and personal assets, is destroyed due to fire or stolen.
The losses may be direct or indirect/consequential. A direct loss implies the visible financial loss to the property due to mishappenings.
Whereas the indirect ones are the losses arising from the occurrence of an incident resulting in direct/physical damages or loss.
The loss to crops due to flood is a direct loss – the destruction of the growing power is a consequential one.
These are the risks arising out of the intentional or unintentional injury to the persons or damages to their properties through negligence or carelessness.
Liability risks generally arise from the law. e.g. liability of the employer under the workmen’s compensation law or other labor laws in India.
In addition to the above categories, risks may also arise due to the failure of others. For example, the financial loss arising from the non-performance or standard performance in a contract, in engineering or construction contracts.
After this overview on pure risk – 3 types of pure risks; explore complete guideline on insurance and it's concepts.
Muntasir Minhaz Muntasir runs his own businesses and has a business degree. Founded iEduNote.com and writes on various business subjects.
