One of the fundamental principals of life insurance involves an important aspect called the Insurable Interest. In practical sense the word insurable interest means that there lies a financial loss on the death of that individual.

Having said that, an individual has an unlimited insurable interest in his own self. The husband and wife have insurable interest in each other because on the death of the husband, a wife would suffer a financial loss. Similarly, parents have insurable interest in their children. This is applicable not only to family members, but also to others. Creditors have an insurable interest in the lives of the debtors, as the death of a debtor would cause him a financial loss. Similarly, a partner of a partnership firm has insurable interest in the lives of other partners. Even the company can insure its key people, as there is an insurable interest in their lives.

Insurance is a contract between insurer and the insured. So if the concept of insurable interest were not there then it would raise many discrepancies and malpractices. This is the reason that the concept of insurable interest is adhered to very strictly.

Add Comments