insurable interest

English · Contract and commercial

Meaning. A financial interest in the subject insured, such that the insured gains by its safety and loses by its loss.

A person has an insurable interest when he stands in a legally recognised relation to the subject matter so that its loss or damage would cause him financial loss. Without it, an insurance contract is a mere wager and void under s.30 of the Indian Contract Act. An owner, mortgagee, bailee or creditor has an insurable interest in property; a person has an unlimited interest in his own life and his spouse's, and a creditor has an interest in the life of his debtor up to the debt.

The time at which it must exist differs. In life insurance it must exist when the policy is taken, not necessarily at death. In marine insurance it must exist at the time of loss, though not necessarily when the policy was taken; the Marine Insurance Act, 1963 defines it. In fire and other property insurance it must usually exist at both times.

Example

A stranger who insures a neighbour's house has no insurable interest, so the policy is a wager and void.

In Indian law

Section 30, Indian Contract Act, 1872 (wagering agreements void)
Marine Insurance Act, 1963

insurable interest

Example

In Indian law

See also

Read more in the study notes