Which type of risk can be insured?

Pure risk can be insured because it involves situations where there is the possibility of loss or no loss, but no chance of gain. This type of risk is associated with events such as natural disasters, accidents, or health-related issues where the outcomes can only result in a loss (such as property damage or liability). Insurance companies are willing to cover these losses because they can quantify the risk, assess it, and set premiums accordingly.

On the other hand, speculative risk involves situations that can lead to either profit or loss, such as investing in the stock market or starting a business. Insurance does not typically cover these risks because they are inherently uncertain and involve a potential for gain, which is outside the scope of traditional insurance.

Thus, pure risk is the only type of risk that can be effectively insured, allowing insurers to manage and mitigate potential losses for policyholders.