Requirements to be met by insurable risks

  1. The risk insured against must not be under the control of the insured.
  2. There must be a large number of similar cases subjected to the same risk.
  3. The risk must be unlikely to affect all the insured at the same time.
  4. The possible loss must be significant enough to the insured to warrant insurance.
  5. Possibility of the risk taking place must not be near certainity e.g. a car cant be insured against wear and tear.
  6. The value of the insured item should be easily determined.
  7. The likelihood and extent of the risk occurring should be sufficiently predictable to enable the determining of the premium rate.
  8. The insured must have insurable interest in the subject matter ie suffer financial loss.
  9. The risk to be insured should not violate the laws of the country.
  10. The risk must be pure as opposed to speculative.
  11. Non –insurable risk-these are uncommon risks whose values are difficult to determine.Many insurers tend to avoid assuming them.
  12. Premium- it refers to the amount of money that an insurance company charges for insurance coverage which is usually paid on a regular basis.

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