Insurable Interest

In simple words, insurable interest means monetary Insurable Interest interest. No person can enter into a valid contract of insurance unless he has insurable interest in the subject matter of insurance. A person is said to have insurable interest in the subject matter, if he suffers financially, by its loss or destruction. Thus a person has insurable interest in his own life, in the life of his spouse or child or debtor. Similarly the owner of a property has an insurable interest in it.

It is also important, to know the time at which the insurable interest must exist to execute a valid contract of insurance. It depends on the branch of insurance. In the case of life insurance, the insurable interest must exist at the time when the policy is taken. It may not be in existence at the time of the death of the person whose life is insured. For eg. A creditor can insure the life of his debtor to the extent of the debt. Even if the debtor dies after paying off the debt, the creditor can get the insured amount. This is because at the time of effecting the insurance the creditor had an insurable interest in the life of the debtor.

In fire insurance, the insurable interest must be present not only at the time of the contract but also at the time of loss of the subject matter. In marine insurance, it must be present at the time of loss of the subject matter. It need not be present at the time of making the contract.