General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A healthy teacher applies for individual health insurance. The teacher's exposure to future medical expenses from an unexpected illness is best classified as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The possibility of suffering unexpected medical expenses involves only the chance of loss or no loss - there is no chance of financial gain. That makes it a pure risk, the type of risk insurance is designed to handle. A speculative risk would offer a chance of both gain and loss, such as a business venture, and a hazard is a condition that makes a loss more likely, not the risk itself.
Why the other options are wrong
- B) There is no chance of financial gain from becoming ill, so the risk is pure, not speculative.
- C) A moral hazard is a condition of dishonesty that increases the chance of loss; the teacher's exposure is a risk, not a hazard.
- D) The illness has not occurred, so no loss has been incurred.
Memory hook
Illness = lose or break even. That's pure risk - the insurable kind.