Insurable Interest

Definition:

Insurable interest is the willingness to get protection against the financial loss which may arise due to the death of an individual or damage of an object. It is an investment in insurance that protects any object or person that is subject to financial loss.

Description:

Insurability is the degree to which a person or a company is deemed insurable by the insurance company. Having an insurable interest in the object is about securing it from damage otherwise it will lead to a financial loss. Such objects/humans must be insured so that the policy pays you to recover the financial loss. The insurance policy protects the financial interest of the individual or person by covering the object or person.

IInsurable interest is the fact that forms the basis of the insurance policies connecting the insured and the insurance company. Insurable interest is the essential requirement for issuing an insurance policy. If there is no expected financial loss, then there is no insurable interest.

Example:

Piyush was the sole breadwinner in the family. He wanted to seek a term plan because he thought that after his death the family would have no financial security. In order to give the family financial stability, he bought a term plan considering that loss of his life would lead to damage to the family. He had insurable interest in his life which is why he applied for the insurance policy.

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ADV/6/22-23/420