Page 8 - Life Assurance
P. 8
/1 What do we mean by the Principle of
Insurable Interest ?
- Insurable Interest is a legal requirement
to prevent insurance from becoming a gambling
contract:
A fundamental legal principle that strongly
supports the principle of indemnity is that of
insurable interest.
This principle was issued at England by an Act
of Parliament in the year 1746.
Under this principle, an insured must face a
personal loss, or will be unable to collect
amounts due when a loss due to the insured
peril happens.
Insurable interest is always a legal
requirement, otherwise the insured could collect
without personal loss.
This would establish a moral hazard and
would be deemed contrary to public policy.
This principle of insurable interest is also
necessary to prevent insurance from becoming
a gambling contract. In life insurance, an important
reason for requiring insurable interest is to remove a
possible incentive for murder.
49 Life31/life/life 08
Insurable Interest ?
- Insurable Interest is a legal requirement
to prevent insurance from becoming a gambling
contract:
A fundamental legal principle that strongly
supports the principle of indemnity is that of
insurable interest.
This principle was issued at England by an Act
of Parliament in the year 1746.
Under this principle, an insured must face a
personal loss, or will be unable to collect
amounts due when a loss due to the insured
peril happens.
Insurable interest is always a legal
requirement, otherwise the insured could collect
without personal loss.
This would establish a moral hazard and
would be deemed contrary to public policy.
This principle of insurable interest is also
necessary to prevent insurance from becoming
a gambling contract. In life insurance, an important
reason for requiring insurable interest is to remove a
possible incentive for murder.
49 Life31/life/life 08
