What is the fundamental characteristic of Pure Risk in insurance?

Pure risk is characterized by situations that only involve the possibility of loss or no loss, without the chance of gaining from the situation. This type of risk is typically found in various insurance contexts, such as property damage or personal injury, where the outcomes can only be negative or neutral, thus eliminating any potential for profit.

In the context of insurance, pure risk is what most insurance policies address, as they are designed to provide coverage in instances where financial loss can occur, such as natural disasters, theft, or accidents. The essence of pure risk aligns with the concept of insurable risks, where individuals seek to mitigate potential financial losses rather than seeking to profit from those risks.

The other options presented do not accurately define pure risk. Potential gains would imply the presence of speculative risk, which is fundamentally different as it includes the possibility of profit. Stock market investments are linked to speculative risks due to their volatile nature and potential for financial return, not pure risk. Finally, while legal liabilities can involve pure risk, they do not solely define it, as pure risk encompasses a broader range of scenarios beyond just legal liabilities.