Car Insurance SA Glossary

To ensure a risk it needs to meet certain pre-requisites and one must be able to find insurance for it. If no insurance company is prepared to insure a particular risk it simply means that it is not an insurable risk. Insurance companies have the right to refuse insurance if they are not prepared to carry a specific risk. The insurer must be able to operate the business profitably and certain risks fall outside the definition of an insurable risk.

The criteria for an insurable risk are:

• The loss insured against must be definable.
• It must be completely accidental – an unforeseen event, a mishap.
• It must cause a financial loss should it happen, if not, it’s not insurable.
• An insurer must be able to predict losses, therefore it needs to be part of a big enough risk groups.
• The insurance company must be able to calculate a fair premium on the risk.
• The insurance company must be in a position to calculate the possibility of loss.
• Risk must be pure, not speculative. Speculative risks are subject to the possibility of financial gain and therefore not insurable.

If you compare your car to the criteria above and you want to insure is against theft, fire and accident, you will find that it is indeed an insurable risk.