insurable interest


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Insurable Interest

A right, benefit, or advantage arising out of property that is of such nature that it may properly be indemnified.

In the law of insurance, the insured must have an interest in the subject matter of his or her policy, or such policy will be void and unenforceable since it will be regarded as a form of gambling. An individual ordinarily has an insurable interest when he or she will obtain some type of financial benefit from the preservation of the subject matter, or will sustain pecuniary loss from its destruction or impairment when the risk insured against occurs.

In certain jurisdictions, the innocent purchaser of a stolen car, who has a right of possession superior to all with the exception of the true owner, has an insurable interest in the automobile. This is not the case, however, where an individual knowingly purchases a stolen automobile.

Insurable interest is not dependent upon who pays the premiums of the policy. In addition, different people can have separate insurable interests in the same subject matter or property.

insurable interest

a person has such an interest in property or in the life of a person if damage or destruction of the property or death of the person would expose him to pecuniary loss or liability. See INSURANCE.

INSURABLE INTEREST. That right of property which may be the subject of an insurance.
     2. The policy of commerce, and the various complicated rights which different persons may have in the same thing, require that not only those who have an absolute property in ships or goods, but those also who, have a qualified property in them, may be at liberty to insure them. For example, when a ship is mortgaged, and the mortgage has become absolute, the owner of the legal estate has an insurable interest, and the mortgagor, on account of his equity, has also an insurable interest. 1 Burr. 489. See 20 Pick. 259; 1 Pet. 163.

References in periodicals archive ?
If the insurable interest doctrine creates perverse incentives that
While it is true that Petro Mart had neither of these interests and was not responsible for the repair of the pumps, these facts, standing alone, do not preclude a finding of an insurable interest. One of the aspects of Petro Mart's business was selling gasoline at the insured location.
The court here found that a court order requiring the ex-husband to cooperate in his ex-wife's attempts to obtain the insurance was not sufficient to create an insurable interest over the objection of the person to be insured.
The first category includes articles pertaining to the (1) insurable interest, (2) applicants' duty to disclose misrepresentations, (3) interpretation of the policy, (4) timely notice of increased risks, (5) insurance fraud, and (6) double insurance.
NAIFA-Florida joined in the push during the 2007 legislative session for a bill that boosted Florida's insurable interest law by creating standards for the sale of personal insurance policies to individuals who are seeking to insure people other than themselves.
disclosure and transparency [are essential] so people know the effects of a life settlement transaction." Such effects, she explains, can include tax consequences-a life settlement is taxable, unlike a death benefit; whether the requirements for insurable interest are met; and whether the individual selling her policy has gotten the best price in the transaction.
Part II explains the requirement of an insurable interest and how such a requirement relates to an insurance contract.
In making the distinction between insurance and derivatives contracts used to hedge risks, we should not lose sight of the moral hazard concern that leads to the insurable interest requirement imposed by insurance regulation.
"It is a shady practice for a third party stranger, who has no insurable interest, to solicit an individual to purchase a life insurance policy; then to finance or pay for the premiums, become the owner and hope the individual dies, all for the purpose of making a buck," says Michael Ripley, a six-term member of the Indiana House who served on the Insurance Committee.
A party to a property insurance contract may not recover absent an insurable interest in the damaged property.
The bill does not apply to policies not issued for delivery in Florida or that are not issued in Florida--and the insurable interest must exist at the time coverage begins, but may subsequently be extinguished without affecting the validity of the policy.
To avoid potentially disastrous gaps in coverage, individuals and their advisors must take steps to ensure that insurance policies are structured to protect the interests of all parties that have an insurable interest (i.e., something to lose) in the event of a property or liability claim.