The principle of Insurable Interest or Insurable Interest is one of the fundamental principles of insurance. It is defined as the concern of an individual towards obtaining an insurance policy for an item or an individual against any type of unforeseen events such as losses or death.
Insurable interest is said to exist when an insured person is able to obtain financial benefit or any other kind of benefit from the continued existence of the object of interest.
Insurable interest in any item or an individual is said to arise when the loss of an item or the individual would result in causing the person to go through financial hardships or any other kind of loss.
Insurable interest occurs due to the ownership, possession or through direct relationship with the object / individual. It can be understood from the following example, that any individual will have an insurable interest in his own home or family and not on some random home or family.
Let us understand it with another example, suppose there are three parties involved in the ship. The involvement will be like, the owner will have the risk of losing the ship, the ship’s charter will have the risk of losing freight and the owner of the cargo has the risk of losing the goods.
Therefore, all the parties involved here have an insurable interest. The presence of insurable interest is what makes the contract of insurance successful.
This concludes our article on the topic of Principle of Insurable Interest, which is an important topic in Business Studies for Commerce students. For more such interesting articles, stay tuned to BYJU’S.
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