Insurable Interest

 

What is Insurable interest

A risk may be insurable but you also need to have an insurable interest in it. It simply means that you need to have an interest in insuring an event: if the insured event occurs, you stand to lose.

Take the case of home insurance. You buy a home insurance policy to cover your house against natural disasters like earthquakes and floods. You have an insurable interest in insuring the house because you will stand to lose if an earthquake damages it. Consider a case where a tenant buys home insurance.

The tenant can insure the contents of the house-because the contents belong to her and she has insurable interest-but not the building. The building belongs to the house owner. So if she insures the building, the insurer will not pay her the claim.

In order to buy insurance, you need to make sure that the risk is insurable and that you have an insurable interest in it.

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