Why might an insurance policy be denied?

An insurance policy might be denied if the risk is deemed speculative because insurance is based on the principle of insurable risk. Insurers are willing to cover risks that are predictable and quantifiable, allowing them to assess the likelihood of a claim occurring and calculate appropriate premiums. Speculative risks, which involve the chance of both gain and loss (such as investments), do not fit the criteria for insurance coverage. Insurance is intended to protect against risks that are unforeseen and unwanted, rather than those that can result in profit or loss purely based on chance. Therefore, if an application or claim is linked to a speculative situation, the insurer may choose to deny the policy or claim as it does not align with the purpose of insurance.

Other factors, such as insufficient funds in the insurer or non-compliance with state laws, typically do not lead to an individual policy being denied; they refer more to overall regulatory and financial frameworks affecting the insurer's ability to operate rather than the risk assessment of an individual policy. Additionally, while age may affect the risk assessment and premiums, it does not inherently lead to a denial of coverage in the same direct way that speculative risk does.