Insurable Interest

INTRODUCTION

An insurable interest is an essential requirement of all contracts of insurance. There is no single authoritative definition of insurable interest, but it is used to describe the assured’s interest in the subject matter at the time of the loss, which the terms of any particular insurable contract require. The assured must have some legal or equitable interest in the subject matter of insurance otherwise the contract will be void. But this is obviously without qualification.

The common law does not require the insured to have someone to have an insurable interest. However, if the contract is one of indemnity an insured who has no interest at the time of the loss will have no claim – he loses nothing, therefore no indemnity is necessary. Any policy in which the insured at the time of the policy has no insurable interest and no expectation of acquiring one is a wager, and void under the GAMING ACT 1845.

The LIFE ASSURANCE ACT 1774 provides that any insurance on the life of a person is void unless the person taking out the policy has an insurable interest in the life insured. Despite its name this Act also applies to personal accident and fire insurance policies. The effect of these words is that an insurable interest must be present in all contracts of insurance. What ‘insurable interest’ means in relation to specific types of insurance contract is considered below under the appropriate heading.

An employee has an insurable interest in his employer’s life to the extent of his wages, and an employer may insure against the loss his employee’s services through death. Spouses have an unlimited insurable in each other’s lives, but other relatives, such as father and son, have no in insurable interest in the lives of each other. A creditor has an insurable interest in the life of the debtor up to the amount of the debt at the date of insurance.

WHETHER OR NOT LIFE SILVER BIRD LTD HAS AN INSURABLE INTEREST, WHAT CONSTITUTES INSURABLE INTEREST AND THE...