The possibility, ability, and readiness of an insurance firm (insurer) to insure (provide insurance coverage to) a particular type of loss (risk) or source of risk (client) against loss or damage, in principle. In other words, insurability is a state of a risk/ client being acceptable for insurance, depending on the policies adopted by a given insurer, which determine the characteristics of such risks/ clients so to be acceptable in the first place. Insurability is subject to a set of factors being met including eligibility, market conditions, broader environment, etc.
For example, in life insurance, insurability is not just a matter of an applicant’s health condition (susceptibility to injury, life expectancy, et.); several other factors could be involved in an insurer’s decision to accept or decline an application, to exclude coverage for a specific type of risk/ client, or to require a higher premium.
All relevant factors shall be considered in determining the amount of risk pertaining to the case in front of an insurance firm: if the risk is too high, the insurance firm will deny coverage, as the specific case (application) is deemed uninsurable according to the insurer’s underwriting standards.
In general, insurance risks can be classified as (1) insurable risks and (2) non-insurable risks. Once accepted for insurance, an insurable risk turns to an insured risk.
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