Page 12 - Life Assurance

Sometimes parties will attempt to avoid the
insurable interest requirements in life insurance
and try to use the contract as a wagering
agreement. Court will usually set aside such
contracts.

For example, two individuals met in a saloon
and after a short discussion, one agreed to insure
his life and then assign the policy to the other if
reimbursed for the premium. The insured person
died and the insurer refused to pay when the facts
surrounding the application became known. The
court understands the insurer's refusal to pay on the
grounds that the transaction was conceived to use
the life insurance policy as a means of effecting a
wager. The intention was to avoid the requirement
of insurable interest by having the person whose life
is insured to take out the policy with the sole
purpose of transferring it to another who had no
insurable interest.

One who takes out life insurance on an
another's life must have an insurable interest in
the person's life.

Thus, a business firm may insure that life of
a key person because that person's death would
cause financial loss to the firm.

A wife may insure the life of her husband
because his continued existence is valuable to
her and she would suffer a financial loss upon
his death.

A father may insure the life of his child, but
a brother may not ordinarily insure the life of his

53 Life31/life/life 08