What does it mean to have uncertainty of loss?

Having uncertainty of loss refers to the concept of risk, which is the possibility that a loss will occur. In the context of insurance, risk encompasses both the potential for a negative event to happen and the uncertainty surrounding when and how that event might materialize. This uncertainty is fundamental to the practice of insurance, as insurers assess risks to determine how much to charge for coverage, the terms of policies, and the likelihood of claims being made.

In contrast, terms like insured risk pertain specifically to risks that have been transferred to the insurer through a policy. Premium refers to the amount paid for insurance coverage, which is influenced by the underlying risk factors. Liability relates to the legal responsibilities one has, typically associated with claims made against them due to actions that result in harm or damage. Therefore, risk, defined as the uncertainty surrounding potential losses, best captures the essence of what it means to have uncertainty of loss.