Requirements Of Insurable Risk
What Does Requirements Of Insurable Risk Mean?
The requirements of insurance risk refer to the factors an insurance company evaluates before creating and offering a policy. Understanding these elements helps protect the company from incurring significant financial losses or being exploited by the insured.
Insuranceopedia Explains Requirements Of Insurable Risk
An insurance company will only allow a policyholder to transfer a loss to them if they are fully aware of the potential consequences. The company ensures that the loss meets specific criteria: it must occur by chance and not as a result of premeditated action; it should be predictable and natural (such as death); the loss must be measurable, with the coverage amount determined in advance; the loss should not be catastrophic (i.e., it should not threaten the solvency of the insurer); and the insurance payment must be justifiable in relation to the value of the loss.
