Insurable interest
From Wikipedia, the free encyclopedia
In relation to insurance, the law prevents people taking out an insurance contract on someone else's life (or someone else's property) unless they have an insurable interest in that life.
Valid forms of insurable interest include being a spouse, being financially dependent on the person, or situations where there is joint ownership of real property or a business.
This concept of insurable interest was established to prevent:
- gambling (on the lives of others), under the pretence of being insurance
- the moral hazard of people taking out insurance on someone's life, and then "arranging" for that person to die - so that they can claim on the policy
In the UK this aspect of law depends on statute law: see the Life Assurance Act 1774 which renders such contracts illegal, and the Marine Insurance Act 1906, s.4 which renders such contracts void.
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