General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which characteristic is necessary for a risk to be ideally insurable?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An ideally insurable risk requires that the probability of loss be determinable, so that the insurer can calculate a premium sufficient to pay claims and expenses. Statistical experience makes this calculation possible. Other ideal-risk criteria include a large number of homogeneous exposures, fortuitous and measurable losses, affordability, insurable interest, and pure-risk status. Without a calculable chance of loss, the premium would be pure guesswork and the insurer could not remain solvent.
Why the other options are wrong
- B) A certain, guaranteed loss is not an insurable risk; insurance requires uncertainty as to occurrence or timing.
- C) Ideal risks are insured across large numbers of similar exposures, not single individuals, so the law of large numbers can work.
- D) A chance of gain makes the risk speculative, which conflicts with the indemnity principle and is not ideally insurable.
Memory hook
Ideal risks come with a price tag the math can defend: calculable odds keep premiums honest.