Insurance Dictionary


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Insurance Dictionary -> insurability

Insurability is a term in the insurance industry that basically refers to how financially feasible it would be for an insurance company to offer a policy to somebody, and the amount of risk associated. Somebody who is not very insurable for a health policy would be elderly, in poor health and working a dangerous job. However somebody who is young has good health and works a safe job would have high insurability. In other words, they can be easily insured or are insurable. An insurance company will asses somebody’s insurability on a number of factors and come to a conclusion as to whether they are insurable or not. That being said, not everyone who is insurable will find the premiums affordable; this generally works in correlation to how much risk they possess.

When deciding on the insurability of a policy, the insurance company will assess how much risk the person possesses. In other words how likely they are to cash in on the policy, which would be financially detrimental to the insurance company. To counteract this risk, the company will raise the premium (the cost) of the policy. Somebody becomes insurable if they agree to pay this premium, but sometimes it is too high and the potential customer might find it more financially viable to open a regular savings account or just forget insurance altogether.

There are many different policies and many different risks to take in to account. Property insurance carries a much higher premium if the property is located in a natural disaster region, such as along the San Andreas Fault line. Equally in life insurance, it is rare that somebody with cancer could afford the premiums, as they would be so high due to the risk of the person dying.

Insurance is often a catch 22 situation where those who really need insurance cannot afford the premiums, whilst those just looking for future security have no problems.

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