What is Pure Risk?
Pure Risk is something where there is no inkling of profit of gain. Where loss, or no profit is the ultimate consequences. These are the situations which are beyond the control of the victim. Fire, natural disaster or liability is the circumstances when it goes out of our reach. It differs from speculative loss in the sense as in speculative risk there is chance of loss or gain hence it is non insurable
Example of Pure Risk
For example, if a factory is destroyed in a fire or say natural disaster is pure risk. It is unlikely to gain anything from this event; however it can be mitigated by buying few facilities such as insurances or bonds etc. Premature death, accidents are few other examples. It is called pure risk.
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Types of pure risk
Pure risk is basically of three types, namely:-
1. Personal risk,
Personal risk includes decrease in the value of property (say devaluation of shares during recession), loss of income or increases in expanses due to sudden circumstances. Recession, premature death, retirement, accident are few risk factors affecting this.
2. property risk
Property risk in pure risk implies loss of some property owned due to unavoidable natural circumstances.
3. liability risk.
Whereas liability risk is something under which a person is tried under law for his unlawful act which incurred harm to a third party. He may be sued to no limit under this type of risk. Hence these risks need to be managed.
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Risk avoidance is one of the major techniques. Here an individual can avoid getting involved into unnecessary risk.
An accident may prove to be bolt from the blue for a person. In life we generally focus on our goals. But at some point of time these risks makes our life stagnant. And fear of such risks prevents us from fulfilling our goals. Hence it is very necessary that something should back us. Something that keeps us assured and insured. Hence insurance planning is also an important part to cope up these pure risks. Life insurance compensates for the economic losses incurred to an individual due to loss of limb, health or life but not limited to this. Buying insurance coverage is not only important because a person might be dying anytime, but also viewing to the fact that other would live on. Especially for them who are the dependents to the demise.
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