Question

What last three elements must be present before a pure risk can be insured?

Answer 1

In order for a pure risk to be insured, there must be loss exposure, insurable interest, and an insurance pool.

Step-by-step explanation:

In order for a pure risk to be insured, there are three elements that must be present:

1. Loss Exposure: There must be a potential for loss or damage to occur. This means that the risk must be uncertain and not within the control of the insured individual.
2. Insurable Interest: The insured individual must have a financial or legal interest in the subject matter of the insurance. For example, if someone owns a car, they have an insurable interest in insuring it against damage or theft.
3. Insurance Pool: There must be a large number of similar risks that can be grouped together to spread the risk. This allows the insurer to collect premiums from many individuals and use that money to pay for any claims that may arise.

These three elements ensure that the insurance company can accurately assess and manage the risk, and provide coverage to individuals who need it.