Insurance guide - insurable interest

UK Principles of Insurance - Insurable Interest

There are five basic legal principles of insurance that must be seen to apply before the policy is valid - Insurable Interest, Indemnity, Umberrima Fides, Subrogation and Contribution.

Insurable Interest - This means that no person can be effected by a person on the life of another or against any other event, unless the person seekingthe insurance has such an interest in the subject matter that he stands to be deprived in some way by its ceasing to exist. In other words, the insured must benefit from the continied existance of what is insured and suffer by its loss.

The object of this principle is to prevent speculation and gabmbling on the fortunes and misfortunes of others.

In most cases, the insured myst have an insurable interest in a risk both at the time the policy is effected and at the time of the loss. Life assurance policy holders need only have an insurable interest at the time the policy was effected. In many marine policies, the insured need only have an insurable interest at the time of the loss, provided he had an expectation of such loss at the time of effecting the policy.

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