There is an interlink between the terms insurance and the risks. According to the researchers, insurance is the risk management or risk controllable tool. Insurance companies apart from making profit by themselves they also help the individuals in the times of need.
But all the people should keep in mind the things which are considered as risks. Generally, one can define the insurable risk as the loss which the insurer wants to cover and pay for it. One can say the risk as the insurable risk if it satisfies the following features.
- Capricious: The loss should be capricious. By chance and predictable losses will not be covered. Suppose if the insured knows that someone is planning to steal their home, this risk will not get insurance.
- Uncertain: If the risk is certain and expected, then insurance does not come into picture. Only the losses which are uncertain and unexpected are covered under the insurance.
- Significant loss: Insurances are covered only for the losses, which are not covered by the people themselves. So, one will get insurance for the losses which are significant and which cannot be payable by insured.
- The risks which are not financially catastrophic are only considered as the insurable risks.
- Determinable risk: One must be able to determine the likelihood of the risk by applying the methods and the techniques.
- Large market for the risk: Risks which are having only large markets will only get insured. Likelihood of coverage for those losses will be difficult.
These are the different characteristics of risks which will get insured by the insurance company.