In insurance terminology, what is the risk that only involves the possibility of loss and no chance of gain called?

The correct term for the risk that involves only the possibility of loss and lacks any chance of gain is known as pure risk. Pure risk is characterized by outcomes that can only result in a loss, thus there is no potential for profit or financial gain. This type of risk is typically associated with situations such as natural disasters, accidents, or theft, where the financial implications are strictly negative.

In contrast, speculative risk encompasses situations where there is a chance of experiencing a loss, but also an opportunity for gain. Business risk and investment risk are types of speculative risks, as they involve variations in outcomes that could either lead to profit or loss, reflecting uncertainty in the performance of a business or an investment.

Understanding the distinction between pure risk and speculative risk is crucial for insurance producers, as it influences underwriting practices, policy design, and risk management strategies. By recognizing pure risk, insurers can focus on offering protection against losses, ensuring that policyholders are covered for events that can result in financial detriment.