Which of the following is NOT a characteristic of an insurable risk?

• A. The loss is definite in time, cause, and location.
• B. The value of the insured item is measurable.
• C. The risk is speculative.
• D. The risk is part of a large group to predict losses.

Answer: (C)

Insurable risk is a pure risk: it involves only the chance of loss or no loss, not a possibility of financial gain. The traits that support insurability include: the loss is definite in time, cause, and location so claims can be verified and settled; the value of the insured item is measurable so the payout can be properly determined; and the risk comes from a large group so losses can be predicted and priced using the law of large numbers. A speculative risk—where there’s a chance of either loss or gain—is not insurable because it can’t be reliably priced or pooled in insurance. That’s why the statement describing speculative risk is not an insurable characteristic.