Life & Health · Chapter 2 · Risk Types & Insurability
Elements of an Insurable Risk
Definition
For a pure risk to be insurable, the loss must be: due to chance (accidental, outside the insured's control), definite and measurable (time, place, amount documentable), predictable (frequency/severity calculable), NOT catastrophic (reasonable exposure), spread over a large number of exposure units, and the premium must be economically feasible.
Exam tip
War, nuclear disaster, and a $1-trillion policy fail the "not catastrophic / reasonable" test.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms