What must a risk be to be considered insurable?

For a risk to be considered insurable, it must be definite as to time, cause, and location. This means that the insurer can clearly identify when a loss may occur, the specific cause of the potential loss, and where it will happen. These characteristics allow insurers to assess the risk accurately and price the insurance policy appropriately.

Defining the time frame allows for better risk evaluation, as certain risks may only manifest within specific periods. Knowing the cause provides clarity about what factors can trigger a claim, while the location means that the insurer can analyze geographical risks that may affect the likelihood of a loss, such as natural disasters or crime rates.

On the contrary, risks that are vague and unpredictable lack the necessary clarity for proper underwriting, complex risks may involve too many variables for straightforward assessment, and guaranteed occurrences do not reflect the nature of insurable risks, as insurance functions on the basis of uncertainty rather than certainty.