What criteria must losses meet to qualify for insurance coverage?

For losses to qualify for insurance coverage, they typically must be accidental and unintentional. This criterion is essential because insurance is designed to protect against unforeseen events that can cause financial harm or loss. If the losses were predictable or intentional, it would pose significant challenges for insurers; they would be unable to effectively manage risk since policyholders might deliberately create a loss to collect insurance benefits.

Additionally, if losses were frequent and low-cost, it would not be sustainable for insurance companies, as the administrative and operational costs of handling numerous small claims could outweigh the premiums collected. Likewise, if losses were voluntary and devoid of measurable factors, it would create ambiguity around risk assessment and coverage terms, making it impractical for insurers to provide reliable protection.

Thus, the requirement for losses to be accidental and unintentional aligns with the fundamental principles of risk management and insurance, providing a fair balance between risk exposure for the insurer and compensation for the insured in cases of genuine loss.