Which type of risk is considered insurable?

Pure risk is considered insurable because it involves situations that carry a possibility of loss but no possibility of gain. In the context of insurance, pure risks typically cover events such as fire, theft, or natural disasters, where the outcomes are either a loss or no loss at all. Insurance companies can assess and manage pure risks more effectively because they can calculate the likelihood of occurrence and set premiums accordingly. This predictability enables them to pool risks from multiple policyholders, thereby spreading the financial burden of claims.

In contrast, speculative risks involve the chance of either profit or loss, making them unsuitable for insurance coverage. Examples include investing in stock markets or starting a business. Moral and morale risks refer to the behavior of the insured that may increase the likelihood of a loss; moral risk is associated with dishonest behavior, while morale risk is linked to carelessness. These types of risks complicate insurability because they introduce additional uncertainties that insurers find challenging to quantify and manage.