You are surrounded by risks. Crossing the road is a risk, taking a flight is a risk, even munching on those fries is a health risk. You can’t avoid risks, but it helps to know that there is insurance to protect you from the some of the damages that these risks can cause. Most people buy insurance in three quick steps: give the agent a hasty listen, sign the paper, and store the policy away. Few know what risks that policy insures, fewer know if they have an insurable interest in the policy?
Insurable risk
A risk is insurable if it’s out of your control, financially measurable and random in nature.
It is important that its occurrence is random because if you can predict its occurrence, it ceases to be risk and becomes more of a certainty.
Take life insurance. It covers your dependants financially upon your death. Early death is a risk that is random in nature, but as you grow older its probability increases.
