relationship with a person or thing that supports issuance of an insurance policy. A person having an insurable interest can derive financial advantage from preservation of the subject matter insured or suffer loss from its destruction. An insurable interest in the life of another requires that the continued life of the insured be of real interest to the insuring party. The connection may be financial (as when a creditor insures the life of his debtor), or it may consist of familial or other ties of affection.
relationship between an insured person or property and the potential beneficiary of the policy. For example, a wife has an insurable interest in her husband's life, because she would be financially harmed if he were to die. Therefore, she could receive the proceeds of the insurance policy if he were to die while the policy was in force. If there is no insurable interest, an insurance company will not issue a policy.
expectation of a monetary loss that can be covered by insurance. Insurable interest varies according to the type of policy. These relationships give rise to insurable interest: (1) owner of the property; (2) vendor (to the extent of the unpaid balance due on the property sold to the vendee); (3) vendee; (4) bailee (to the extent of the value of the property under his or her temporary care, custody, and control); (5) bailor; (6) life estates; (7) fee simple estates; (8) mortgagee (to the extent of the unpaid balance due on the loan to which the property is pledged as security); and (9) mortgagor.
an interest in a person or property that would cause one a loss if that person or property were injured. Must be present to collect from an insurance policy.
Example: The Good Money Savings Association lent $50,000 on Abel's house. Yesterday the house was destroyed by fire. Good Money can collect on its insurance policy, because they were insured and had an insurable interest. Five Star Savings also had an insurance policy on the home but had no lien, so they couldn't collect.
