Which type of risk is typically insurable?

The type of risk that is typically insurable is pure risks. Pure risks are those that involve the possibility of loss or no loss, but not profit. They usually pertain to situations such as accidents, natural disasters, or theft, where the outcomes are either negative or neutral, but not positive. Insurance can effectively cover such risks because they are predictable and based on statistical probabilities, allowing insurers to assess the likelihood of occurrences and set appropriate premiums.

In contrast, speculative risks involve the chance of both loss and gain, such as investing in the stock market or gambling. These types of risks are not insurable because they involve uncertainty regarding potential future profits or losses, which does not align with the fundamental principle of insurance that is designed to provide security against uncertain losses.

Commercial risks can be a broader category that includes various uncertainties businesses face, some of which may be insurable, but they often do not fit neatly into the pure risk category. Financial risks pertain to exposure that a business or individual might face due to variability in financial markets, and while some elements might be managed through financial instruments rather than traditional insurance products, they are not commonly regarded as insurable risks in the same way pure risks are.

Understanding the characteristics of pure risks and their insur