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Freiberg and Peck, What is an insurable interest
Freiberg and Peck, What is an insurable interest
A person has an "insurable interest" in something when loss or damage
to it would cause that person to suffer a financial loss or certain
other kinds of losses. For example, if the house you own is damaged by
fire, the value of your house has been reduced, and whether you pay to
have the house rebuilt or sell it at a reduced price, you have suffered
a financial loss resulting from the fire. By contrast, if your
neighbor's house, which you do not own, is damaged by fire, you may
feel sympathy for your neighbor and you may be emotionally upset, but
you have not suffered a financial loss from the fire. You have an
insurable interest in your own house, but in this example you do not
have an insurable interest in your neighbor's house.
A basic requirement for all types of insurance is the person who buys a policy must have an insurable interest in the subject of the insurance. You have an insurable interest in any property you own or which is in your possession.
For purposes of life insurance, everyone is considered to have an
insurable interest in their own lives as well as the lives of their
spouses and dependents. For property and casualty insurance, the
insurable interest must exist both at the time the insurance is
purchased and at the time a loss occurs. For life insurance, the
insurable interest only needs to exist at the time the policy is
purchased.