The risk that can be covered by an insurance contract. It falls within the set of insurance risks that constitutes the main value proposition of an insurance firm (core risks that allow insurance firms to turn a profit). Insurance firms usually determine acceptable types of risks for which insurance coverage can be provided on a commercial basis- that is, the premiums charged can  cover possible claims and operating expenses as well as expected profits. These include a wide range of losses, including those resulting from accidents such as fire, theft, destruction or legal cases/ lawsuits. Buying commercial insurance has its price or cost as manifested in the premiums paid to the insurance company. Against these premiums, the company agrees to pay the insured (its customer) in the event a covered loss is incurred by the insured over the term of the insurance contract.

There are types of risk that may not be insurable (insurability is questionable)- i.e., insurance firms don’t provide coverage against losses associated with such risks. In other words, these risks may not be covered on a commercial basis (the costs of their coverage exceed the benefits to an insurance firm).

Insurance companies typically cover the so-called pure risks- i.e., the risks that have no possibility or a very small possibility of occurrence. The prime examples are property damage risks, such as earthquakes, hurricanes, floods, fires, etc. Pure risks associated with liability include litigation. All such risks are insurable by default. On the other extreme, there are speculative risks- i.e., risks that have a great chance or possibility that losses would happen and consequently a great number of claim will consequently be filed. Gambling and investments are typical examples of these risks. The mainstream insurance market does not deem speculative risks to be insurable.