Question

30. Explain the principle of insurable interest. When must insurable interest exist in life
insurance, fire insurance and marine insurance.
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Answer 1

Answer:

Insurable interest is a type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item, or event in question. The insurance policy would mitigate the risk of loss if something happens to the asset—like becoming damaged or lost.

Insurable interest is a type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item, or event in question. The insurance policy would mitigate the risk of loss if something happens to the asset—like becoming damaged or lost.Insurable interest is an essential requirement for issuing an insurance policy that makes the entity or event legal, valid and protected against intentionally harmful acts. People not subject to financial loss do not have an insurable interest. Therefore a person or entity cannot purchase an insurance policy to cover themselves in the event of a loss