General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
All of the following are characteristics of an ideally insurable risk EXCEPT:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Ideally insurable risks are fortuitous, definite, measurable, non-catastrophic, and spread across many homogeneous exposure units so the law of large numbers allows accurate loss prediction. A loss that is certain to occur and known in advance is not a risk at all - it is a planned, known cost that cannot be pooled, and insuring it would merely prepay a certain expense plus expense loading.
Why the other options are wrong
- A) Numerous homogeneous exposures enable the law of large numbers and accurate premium setting - a hallmark of insurability.
- B) Fortuitous losses are accidental and unexpected from the insured's viewpoint, which is exactly what insurance is designed to pool.
- C) Losses must be definite in time and place and measurable in amount, and they must not be catastrophic to many exposure units at once.
Memory hook
Many similar exposures + measurable loss + affordable premium = ideal. Anything else fails.