What is defined as the chance of financial loss occurring?

The appropriate definition of the chance of financial loss occurring is captured by the term "Pure Risk." Pure risk refers specifically to situations where there are only the possibilities of loss or no loss, without any potential for gain. This concept is fundamental in the insurance industry as it forms the basis of risk management and coverage options available to policyholders.

In the context of insurance, pure risks are typically insurable events, such as property damage, natural disasters, or accidents, where the outcomes are limited to loss, thus allowing insurance companies to calculate the likelihood and cost of these potential losses through actuarial science. This concept contrasts with speculative risks, where there is a potential for either loss or gain, which are generally not insurable.

Other terms, such as indemnity, general insurance, and hazard, have distinct meanings. Indemnity relates to the principle that insurance should restore the insured to their original financial position after a loss. General insurance encompasses various types of coverage that protect against pure risks but does not define the risk itself. Hazard denotes a condition or situation that increases the likelihood or severity of a loss but does not define the financial loss chance itself. Thus, the precise identification of pure risk as the chance of financial loss is what makes it the correct choice