insurable risk

Insurable risk is a core concept in insurance, a system designed to manage uncertainty. It's a method of coping with risk by substituting certainty for uncertainty regarding the economic cost of potential losses. For a risk to be considered insurable by an insurer, it must meet several criteria: the objects insured need to be numerous and similar enough to predict losses accurately; they shouldn't be prone to simultaneous destruction; the loss must be accidental and beyond the insured's control; and there must be a clear way to determine if a loss occurred and its extent. From the insured's perspective, the probability of loss shouldn't be so high as to make premiums excessive, yet the potential loss must be significant enough to cause financial hardship if uninsured.12