British Columbia Fundamentals Of Insurance (FOI) Practice Test 2025 - Free FOI Practice Questions and Study Guide

A speculative risk is characterized by the potential for both loss and gain, as it involves situations where the outcome is uncertain and can result in either a positive or negative result. This type of risk is often associated with investments, ventures, or business ventures where there is a chance to profit, but also the possibility of incurring losses.

For instance, when an individual invests in the stock market, they engage in speculative risk as they may experience gains if the stock prices rise, or losses if the stock prices fall. This dual potential is what distinctly separates speculative risks from pure risks, which only involve the possibility of loss without any potential for profit.

The other options suggest characteristics that do not accurately define speculative risk. The notion that it always results in a loss misrepresents its essence, as it can lead to gains. Additionally, to assert that it can only lead to financial gain overlooks the inherent risk of loss involved. Lastly, while speculative risks are generally less insurable compared to pure risks due to their unpredictability, they are not categorically uninsurable in all circumstances. Therefore, recognizing the potential for both loss and gain is central to understanding speculative risks.