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Insurable Risks

The risk which can be covered through different types of insurance policies are known as insurable risks. The probability of an insurable risk can be determined. In other words, such risks can be forecasted.

All risks can’t be insured. Insurance is available for those risks that are considered insurable. For example, risks related to life and property against fire, theft, riots, etc. are insurable. The features of insurable risks are as follows:

(i)    Large number. The risk must be common enough to justify its priding at a nominal cost over a large number of people.

(ii)    Uncertainty. There must be an element of uncertainty as to the occurrence of risk or the time of its occurrence.

(iii)    Possibility of Estimation of Loss. It must be possible to estimate the loss, i.e., the risk must have a mathematical value of probability. In other words, the loss must be predictable and must be capable of being estimated mathematically.

(iv)    Insurable Risk. The party must have some interest in avoiding the risk which should no be of a trifling nature.

(v)    Geographical Dispersal of Policy-holders. As far as a possible, the policy-holders, should be dispersed over a wide geographical are so that the happening of an event in a small are may not cause burden on the insurance company.

(vi)    Monetary Value. Insurance policy can be issued only in terms of monetary compensation on the happening of an event. Sentiments and esteem can’t be insured as they can’t be measured in terms of money.

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