For a loss to be insurable, the loss generally must be:

Why D is correct

Insurable losses must be fortuitous, which means they occur by chance and are beyond the insured's control. An intended or deliberately caused loss is not fortuitous and cannot be insured, because the insured could create the loss simply to collect the claim, a situation known as moral hazard. The fortuitous requirement preserves the fundamental uncertainty on which the law of large numbers and premium calculations depend. Without fortuity, the risk is not measurable and the contract would encourage rather than protect against loss.

Why the other options are wrong

• A) An intended loss is not insurable. Insurance is designed for accidental and unexpected events, not for losses the insured plans to bring about. An intentional loss is excluded because insurance would otherwise create an incentive to manufacture claims.
• B) Moral hazard is a condition that increases the probability of loss, such as dishonesty or carelessness. It is not a requirement for a loss to be insurable. Moral hazard describes a dishonest condition that increases loss likelihood, not a quality a loss must possess.
• C) A loss certain to occur is a predictable cost rather than an insurable risk. There is no uncertainty to transfer, so the element of risk is absent. A certain loss is a budgeting problem, not an insurable risk, because there is no uncertainty to transfer.

Memory hook

Fortuitous = fate, not your own hand. The loss must happen by chance, not by choice.