Insurable Interest
What is ‘Insurable Interest in a Maritime Insurance Policy’
The term “insurable interest” refers to the benefit (or interest) a person has in an insured object (or person – as in a life insurance insurable interest). This benefit can refer to a financial benefit, among others. A person has insurable interest in a thing when he or she would experience some kind of loss (financial or otherwise) if the thing were to be damaged or lost.
Say that you have piece of jewelry in your home that is also a family heirloom. If someone were to steal it (or if you were to drop it down the sink, or in the toilet, or even lose it in the garbage) you would suffer different kinds of loss, both financial and emotional. Thus, you have an insurable interest in it. If a friend were to lose her engagement ring in the same way, you would probably feel sorry for her and hope she finds it, but you yourself will not have gone through any kind of financial loss. You have no insurable interest in her ring in this case. You cannot purchase insurance unless you have this kind of interest in the thing you want to insure.
Insurable interest applies to all types of general insurance policies, including Marine. There is no single definition of insurable interest but the following covers its essential elements:
“The legal right to insure arising out of a financial relationship recognized at law, between the insured and the subject matter of insurance”
Marine Insurance Act 1906 section 4 commences by stating that:
“Every contract of marine insurance by way of gaming or wagering is void”
This statement shows the importance of insurable interest. Its absence makes the insurance policy a bet or wager. In the early days of insurance, marine policies were enforceable at common law even if there was no insurable interest. The reason for this was that at that time wagers in general were legally enforceable. However, this general freedom to insure was often abused. An insurance contract which lacks
The term “insurable interest” refers to the benefit (or interest) a person has in an insured object (or person – as in a life insurance insurable interest). This benefit can refer to a financial benefit, among others. A person has insurable interest in a thing when he or she would experience some kind of loss (financial or otherwise) if the thing were to be damaged or lost.
Say that you have piece of jewelry in your home that is also a family heirloom. If someone were to steal it (or if you were to drop it down the sink, or in the toilet, or even lose it in the garbage) you would suffer different kinds of loss, both financial and emotional. Thus, you have an insurable interest in it. If a friend were to lose her engagement ring in the same way, you would probably feel sorry for her and hope she finds it, but you yourself will not have gone through any kind of financial loss. You have no insurable interest in her ring in this case. You cannot purchase insurance unless you have this kind of interest in the thing you want to insure.
Insurable interest applies to all types of general insurance policies, including Marine. There is no single definition of insurable interest but the following covers its essential elements:
“The legal right to insure arising out of a financial relationship recognized at law, between the insured and the subject matter of insurance”
Marine Insurance Act 1906 section 4 commences by stating that:
“Every contract of marine insurance by way of gaming or wagering is void”
This statement shows the importance of insurable interest. Its absence makes the insurance policy a bet or wager. In the early days of insurance, marine policies were enforceable at common law even if there was no insurable interest. The reason for this was that at that time wagers in general were legally enforceable. However, this general freedom to insure was often abused. An insurance contract which lacks