What characteristic must a risk have for it to be considered insurable?

A risk is considered insurable when it has definable conditions that can be clearly understood and evaluated. This means that the insurer can identify the risk, understand its nature, and assess the likelihood of its occurrence. Definable conditions allow for accurate underwriting and pricing of insurance policies.

Furthermore, defining the conditions surrounding a risk enables both the insurer and the insured to understand what is covered by the policy, and under what specific circumstances a claim might arise. This clarity helps create fair and workable insurance agreements, where both parties know their roles and responsibilities.

While factors like high premiums may affect affordability, they do not determine whether a risk can be insured. Risks that are completely preventable do not fit the insurable nature because they can be eliminated rather than transferred. Lastly, while insurers manage unpredictable events, the essence of insurability relies on the ability to define and evaluate those risks effectively.