Lesson Summary

Insurable risks need to be financial, meaning they must have a financial value attached to them. This could be tangible property or legal liability for compensation. Non-financial risks are those where value cannot be attached, such as loss of enjoyment or moving for a specific school.

• Pure risks are insurable where there is a possibility of loss but no gain. If a claim is made and met by insurers, you may break even or lose a little due to excess, but there is no opportunity to gain financially.
• Uninsurable risks fall under speculative risk, where there is a chance to gain from a loss. This is akin to gambling and is exemplified by scenarios that provide no motivation for success due to potential financial benefits from failure.

The distinction between particular and fundamental risks is crucial. Particular risks are insurable and localized in their impact, thus quantifiable and manageable. Fundamental risks, however, are uninsurable due to their vast scale and complexity. Examples include war, famine, and nuclear risks.