Insurable interest refers to a legal and financial concept that determines whether a person or entity has a valid financial interest in the preservation or continued existence of a particular asset or individual. In the context of insurance, it is a crucial principle that helps ensure that insurance policies are based on genuine risk-sharing and not on speculative gambling.
Insurable interest in property insurance
In property insurance, you must have an insurable interest in the property to insure it. This means that you must stand to suffer a financial loss if the property is damaged or destroyed. So, as a homeowner, you have an insurable interest in your house and its contents because you would incur a loss if anything were to happen to them.
Insurable interest in life insurance
In the case of life insurance, you generally need to have an insurable interest in the person whose life is being insured. Close family members, business partners, or anyone who would experience financial hardship in the event of the insured’s death typically have an insurable interest.
The purpose of insurable interest is to prevent individuals from taking out insurance policies on assets or people with no legitimate interest, as this could lead to fraudulent activities or moral hazards. You can also review the Consumer Insurance Contracts Act 2019.
It’s worth noting that the specific requirements for insurable interest may vary from jurisdiction to jurisdiction and may also depend on the type of insurance policy in question. Insurance companies and policies will typically define the criteria for establishing insurable interest. Thank you for visiting our insurance blog. Also, see Principles of Insurance for more information. We hope you found it helpful. If you are searching for a cheap car insurance or home insurance quote, check out our online comparison engine or call us at 042 935 9090 today.