Legal Definitions - insurable

The term insurable describes something that an insurance company is willing to cover against potential loss, damage, or liability. For something to be insurable, the associated risks must be quantifiable, predictable enough for an insurer to calculate a premium, and generally not against public policy.

• Example 1: A newly constructed commercial building in a low-risk flood zone is considered insurable for property damage. The building meets all current safety codes, its construction materials are standard, and its location does not present an unusually high risk of natural disaster. An insurance company can assess its value and the likelihood of various perils (like fire or storm damage) to offer a policy.

  Explanation: The building's sound construction, adherence to codes, and favorable location allow an insurance company to reasonably evaluate the potential risks and determine a fair premium, making it eligible for coverage.

• Example 2: A healthy individual with no significant pre-existing medical conditions applying for a life insurance policy is typically considered insurable. The person's medical history, age, and lifestyle factors present a predictable risk profile to the insurer.

  Explanation: Because the individual's health status and lifestyle do not indicate an immediate or unusually high probability of early death, an insurance company can assess the long-term risk and offer a life insurance policy.

• Example 3: A small business's inventory of electronics, stored in a secure warehouse with fire suppression systems, is generally considered insurable against theft or damage. The value of the inventory can be accurately documented, and the security measures reduce the overall risk.

  Explanation: The ability to quantify the value of the goods and the presence of protective measures make the risk of loss or damage manageable and calculable for an insurance provider, allowing them to offer coverage.