Insurability can mean either whether a particular type of loss (risk) can be insured in theory, or whether a particular client is insurable for by a particular company because of particular circumstance and the quality assigned by an insurance provider pertaining to the risk that a given client would have. An individual with very low insurability may be said to be uninsurable, and an insurance company will refuse to issue a policy to such an applicant. For example, an individual with a terminal illness and a life expectancy of 6 months would be uninsurable for term life insurance. This is because the probability is so high for the individual to die within the term of the insurance, that he/she would present far too high a liability for the insurance company. A similar, and stereotypical, example would be earthquake insurance in California. Insurability is sometimes an issue in case law of torts and contracts. It also comes up in issues involving tontines and insurance fraud schemes. In real property law and real estate, insurability of title means the realty is marketable.

Characteristics of insurable risks

Risks that can be insured by private companies typically share seven common characteristics.

Insurable interest

Insurable interest refers to the right of property to be insured. It may also mean the interest of a beneficiary of a life insurance policy to prove need for the proceeds, called the "insurable interest doctrine". For purposes of life insurance, close relatives are assumed to have an insurable interest in the lives of those relatives, but more distant relatives, such as cousins and in-laws cannot buy insurance of the lives of others related by these connections. Thus, a married person has an insurable interest in the life of their spouse, and minor children have an insurable interest in their parents. A person is also presumed to have an insurable interest in his or her own life. In the U.K. a person is considered to have an unlimited interest in the life of their spouse, which the law considers broadly equivalent to having an insurable interest in their own life. Even if not financially dependent on the other, it is legitimate to insure against the death of a spouse. Although many insurers will accept policies of cohabiting couples, they could potentially be invalidated. In recent years, there have been moves to pass clear statutory provisions in this regard, which have not yet borne fruit. Similar treatment was recently extended to civil partners under section 253 of the Civil Partnership Act 2004. Insurable interest is no longer strictly an element of life insurance contracts under modern law, for example with viatication agreements and charitable donations. Often there is no requirement today that the beneficiary have a proven insurable interest in the life of the insured when the insured has purchased the insurance.