Lesson Summary

To be insurable, a risk must have financial value attached to it, such as tangible property or legal liability. If the value cannot be attached, it is considered non-financial.

The insurable risks must be pure risks, where there is a chance of loss but not gain. Excess and potential loss without gain make the risk insurable. The opposite, speculative risk, involves a chance to gain from a loss, making it uninsurable.

Another consideration is particular versus fundamental risks. Particular risks are localised and insurable, like shop premises in a retail park. Fundamental risks, such as war or famine, are vast and unquantifiable, making them uninsurable due to their scale and complexity.