What distinguishes insurable risks from uninsurable risks?

Insurable risks are defined by their characteristics that make them suitable for insurance coverage. One of the primary factors that distinguish insurable risks from uninsurable risks is that insurable risks can be quantified and spread across a pool of policyholders. This means that insurers can assess the likelihood of the event occurring and calculate the potential cost per individual, thus enabling them to charge premiums that reflect the risk.

For an event to be insurable, it must meet specific criteria: it should be definite (in terms of time and cause), it should have a chance of occurring (not certain), and it should be significant enough to warrant coverage. By quantifying such risks, insurers can manage their exposure and remain financially viable while providing protection to policyholders.

In contrast, uninsurable risks are typically those that cannot be accurately assessed, quantified, or spread across a large group. This could include risks that are inherently too uncertain or unpredictable, or those that have the potential for catastrophic losses that are beyond the capacity of insurers to cover through premiums. Thus, the ability to quantify and share the risk across a wider population is a defining feature of insurable risks, making this option the most accurate.