In the context of insurable risks, "substantial losses" refers to what?

In the context of insurable risks, "substantial losses" refers to losses that are large enough to justify the cost of insurance. This concept is fundamental to understanding how insurance operates. Insurance is designed to protect individuals and businesses from financial hardship due to significant losses. When losses are substantial, they can have a major impact on a person’s or a company's financial status, making it reasonable for individuals to seek insurance coverage to mitigate that risk.

Insurers assess whether it is financially viable to provide coverage based on the potential losses they might have to pay out. Thus, the concept of substantial losses aligns with the principle of insurance being a mechanism to protect against significant financial risks. If losses are minimal or could be easily absorbed without insurance, it would be unfeasible for insurance to cover such risks.

In contrast, the other options describe situations that either do not reflect the essence of insurable risks or concern scenarios where insurance would typically not apply, further emphasizing why substantial losses must be significant enough to warrant the costs associated with coverage.