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What is an ‘insurable interest’?

A person has an "insurable interest" in something when loss or damage to it would cause that person to suffer a financial loss or certain other kinds of losses. For example, if the house you own is damaged by fire, the value of your house has been reduced, and whether you pay to have the house rebuilt or sell it at a reduced price, you have suffered a financial loss resulting from the fire. By contrast, if your neighbor's house, which you do not own, is damaged by fire, you may feel sympathy for your neighbor and you may be emotionally upset, but you have not suffered a financial loss from the fire. You have an insurable interest in your own house, but in this example you do not have an insurable interest in your neighbor's house.

A basic requirement for all types of insurance is the person who buys a policy must have an insurable interest in the subject of the insurance. You have an insurable interest in any property you own or which is in your possession.

For purposes of life insurance, everyone is considered to have an insurable interest in their own lives as well as the lives of their spouses and dependents. For property and casualty insurance, the insurable interest must exist both at the time the insurance is purchased and at the time a loss occurs. For life insurance, the insurable interest only needs to exist at the time the policy is purchased.

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Related Information
» General Insurance Law Questions
» Cancellations
» Directors and Officers (D&O) liability insurance
» Employee benefits
» Exclusions and limitations
» Fire Insurance
» Fire Insurance Claim Ebook
» ERISA
» Flood Insurance
» Government regulation
» Insurance claims
» Insurance agents
» Insurance lawsuit
» Insurance marine
» Insurance premiums
» Mortgage/title insurance
» Purpose

Topics Related To Insurance Law
» Insurance Law
» Auto Insurance
» Business Insurance
» Long Term Care
» Disability Insurance
» Health Insurance
» Insurers Bad Faith
» Life Insurance Law
» Property Insurance
» Viaticals
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