Question

Explain the following term/concept:

Insurable Interest

Answer 1

1. A person is said to have insurable interest in the object insured (i.e. subject matter) if he is in such a relationship with the object of insurance that he would stand to benefit monetarily from the object's continued presence or would suffer a financial loss from the object's loss, destruction, or absence. As a result, he must be the owner or authorized user of the object in question.
2. In simple words, insurable interest refers to a pecuniary stake in the subject matter. The insured must have an insurable (financial) interest in the subject matter of the insurance. A person cannot enter into a legal insurance contract unless he has an insurable interest in the object insured. A person has an insurable interest in his own life and possessions. A wife has a vested interest in her husband's life. Similarly, a businessman has insurable interest in the business property.