Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceEasy
Which of the following would NOT be considered an insurable risk?
- ADamage to a car from a collision.
- BLoss due to fire in a commercial building.
- CTheft of personal belongings from a home.
- DFinancial losses from a speculative investment in the stock market.
Show answer & explanationAnswer & explanation
Correct answer: D. Financial losses from a speculative investment in the stock market.
Insurable risks must involve a chance of loss only (pure risk), not a chance of gain or loss (speculative risk). Stock market investments are speculative risks because there's a possibility of gaining money, not just losing it.
Why the other options are wrong
- A. Collision is a pure risk, only possibility of loss.
- B. Fire is a pure risk, only possibility of loss.
- C. Theft is a pure risk, only possibility of loss.
Insurable Risk (Pure Risk)
A risk where there is only the possibility of loss or no loss, with no chance of gain.
- Must be pure risk, not speculative.
- Must be accidental and unintentional.
- Must be measurable and predictable.
Memory trick: Pure risks are safe bets for insurers, not speculative regrets.