- The risk insured against must not be under the control of the insured.
- There must be a large number of similar cases subjected to the same risk.
- The risk must be unlikely to affect all the insured at the same time.
- The possible loss must be significant enough to the insured to warrant insurance.
- Possibility of the risk taking place must not be near certainity e.g. a car cant be insured against wear and tear.
- The value of the insured item should be easily determined.
- The likelihood and extent of the risk occurring should be sufficiently predictable to enable the determining of the premium rate.
- The insured must have insurable interest in the subject matter ie suffer financial loss.
- The risk to be insured should not violate the laws of the country.
- The risk must be pure as opposed to speculative.
- Non –insurable risk-these are uncommon risks whose values are difficult to determine.Many insurers tend to avoid assuming them.
Premium-itrefers to the amount of money that an insurance company charges for insurance coverage which is usually paid on a regular basis.