{Surveyors:4603} The Basic Characteristics of insurable risks

[Naresh Kukkar]

 

The Basic Characteristics of insurable risks

1. Possibility of Loss exposure: It is a situation which creates the possibility of loss. It can be property loss, income loss, loss

of life/health or liability loss exposure resulting from claims made by Third parties.

2. Law of Large Numbers: There is need to have a large number of homogenous exposure units which can provide cushion

to absorb the losses of a few amongst them due to occurrence of insured perils.

3.Definite Loss:The loss should be identifiable enough to be verified and quantified.The event likely to give rise to a loss

should be at particular place at known time due to operation of a known peril/cause.

4. Calculable Loss: There has to be objective evaluation of the amount of loss in the event of occurrence of an event, likely

to give rise to claim.

5. Fortuitous Event:Insurance covers pure risks,which are beyond the control of policyholder/beneficiary.Events that are

speculative in nature, such as business risks are normally outside the scope of insurance.

6. Limited risk of catastrophic losses: The accepted limit of exposure depends on the size of the company, the size of the

policies underwritten.It is difficult to cover huge aggregate losses or policies which can produce exceptionally large

claims, affecting the entire industry. A classic example is nuclear risks and war perils which are clearly excluded from

the scope of insurance covers.

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Naresh  Kumar Kukkar
Jalalabad( W), Punjab
01638-253061
09814706491

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