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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. |
