General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When an underwriter evaluates whether a situation truly presents a possible loss, the first question is usually whether:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
For a loss to be insurable, it must be definite and measurable in amount or time, and the chance of loss must be estimable from data. If the exposure cannot be measured or the probability cannot be approximated, the insurer cannot price the risk and it is not a viable insurance situation. Client preference, cash value, and commissions are unrelated to whether a possible loss exists.
Why the other options are wrong
- B) Which insurer the client prefers is a marketing matter; it does not determine whether a possible loss exists.
- C) Cash value is a feature of permanent coverage and irrelevant to identifying a possible loss.
- D) Commissions are a producer compensation matter and play no role in determining insurability of a situation.
Memory hook
First test of insurability: can you put a number on the loss and a probability on the event?