General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
For a risk to be insurable, the potential loss must be:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
An ideal insurable risk produces losses that can be valued in dollars and predicted statistically for a large group. If the insurer cannot measure the possible loss or estimate its frequency and severity, it cannot set a premium that will fund claims. Measurability and predictability are what allow the law of large numbers to work, and both are prerequisites for sound pricing in accident and health insurance.
Why the other options are wrong
- A) If losses were completely unpredictable, the insurer could not price the coverage at all.
- B) The premium must be small relative to the potential loss, not the other way around.
- D) Loss amounts need not be identical; they must be measurable, and frequency and severity can vary within a pool.
Memory hook
If you cannot count the loss, you cannot insure it.