Which of the following is an example of speculative risk? A) Miguel r

QUESTION

Which of the following is an example of speculative risk?

A) Miguel runs a nursery and sells starter plants in the spring. He has insurance against loss of inventory due to a late spring frost.
B) Penelope works as a book editor from her home office. She has insured her office equipment against fire and theft.
C) Isaac runs a small auto insurance agency. The company has decided to insure boats as well as road vehicles.
D) Victor lives in the hills around Los Angeles, where wildfires are prevalent. He has decided to insure his property against those events.
E) Gail owns and operates an independent bookstore. Because the company is not doing well, she has decided not to insure herself against theft of her inventory.

ANSWER

Answer: C
Explanation: C) Speculative risk involves a chance of either gain or loss. Isaac’s company could gain from the boat premiums it collects, or lose if lots of claims come in.