Risk is the possibility of damage, injury, or loss caused by external or internal events. There are two types of risk: pure and speculative.
Pure risk involves only the possibility of loss. Examples of Pure Risk
- Visiting a friend in the hospital—exposure to bacteria or viruses.
- Intramural sports—an activity that may result in injury.
- Owning real estate—potential for a casualty loss or liability claim.
Speculative risk involves the possibility of loss or gain, like the stock market or gambling. Some types of risk can be mitigated through insurance. Theoretical risk is not insurable, however.