Pure Risk

DEFINITION of 'Pure Risk'

A category of risk in which loss is the only possible outcome; there is no beneficial result. Pure risk is related to events that are beyond the risk-taker's control and, therefore, a person cannot consciously take on pure risk.

This is the opposite of speculative risk.

BREAKING DOWN 'Pure Risk'

For example, the possibility that a person's house will be destroyed due to a natural disaster is pure risk. In this example, it is unlikely that there would be any potential benefit to this risk.

There are products that can be purchased to mitigate pure risk. For example, home insurance can be used to protect homeowners from the risk that their homes will be destroyed.

Other examples of pure risk events include premature death, identity theft and career-ending disabilities.

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