Which condition indicates that a risk is insurable?

The condition that indicates a risk is insurable is that the policy premiums must cover claims and expenses. This is essential for the sustainability of an insurance company. For a risk to be insurable, it must be capable of being accurately assessed and managed financially. When premiums are set, they should be sufficient to cover not just the expected claims, but also the administrative expenses associated with managing the policy and providing coverage.

If premiums fail to cover these costs, it would render the insurance model unsustainable. Insurers rely on a pool of premiums to pay out claims, and sound financial management requires that this pool adequately addresses both anticipated losses and operational costs, ensuring the viability of the insurance business.

Having a highly predictable risk can aid in underwriting and determining premium rates, but it does not alone ensure insurability. Insuring all types of losses is often impractical, as many losses may be unquantifiable or catastrophic in nature. Lastly, a risk that is certain to occur may not be insurable because insurance is intended to mitigate uncertain or unforeseen events, rather than guarantee payment for known outcomes. This underscores the importance of premiums covering claims and expenses as a fundamental criterion for a risk to be deemed insurable.