Which risks are insurable?


Editorial team Published on

Pure risk is the only type of risk that is insurable.

Why Pure Risk is Insurable

Pure risk (also known as absolute risk) involves situations where the only outcomes are loss or no loss, with absolutely no possibility of financial gain. Insurance is designed strictly to protect against unforeseen, accidental losses and restore you to your original financial state—not to help you generate a profit. Examples include:

  • 🏠 Fire or natural disasters damaging a home
  • 🚗 Car accidents or vehicle theft
  • 🏥 Unexpected illness or premature death

Why Other Types of Risk Are Uninsurable

  • ❌ Speculative Risk: This type of risk involves a chance of loss, no change, or a potential for gain. Examples include gambling, investing in the stock market, or buying cryptocurrency. Because there is a deliberate choice to risk money for profit, insurance companies will not cover it.
  • ❌ Strategic or Market Risk: Broad economic shifts, such as inflation, changes in consumer fashion, or overall business failure due to poor management, are uninsurable. They are too unpredictable and lack a large pool of similar, accidental exposures required to calculate premiums accurately.