Examples Of Insurable Interest
Before discussing the examples Of Insurable interest, I want to explain the basics regarding this doctrine. Principle of insurable interest denotes that only the person who has insurable interest on a subject matter of insurance can insure that particular subject matter. It is not possible to affect an insurance policy on a subject matter by someone who has got no insurable interest on that subject matter.
Some Examples Of Insurable Interest In Different Insurances are given for your understanding:
Examples Of Insurable interest which exist in the following cases:
- Owners: Owners have got insurable interest to the extent of full value.
- Part owners or joint owners: They have insurable interest to the extent of their part or financial interest.
- Mortgagor/Mortgagee: Mortgagor, being the owner of the property, has got insurable interest. Mortgagee, though not owner, has got insurable interest to the extent of the money advanced, plus interest and an amount to cover up insurance premium.
- Bailees: They have got insurable interest because of a potential liability being created if goods belonging to others get lost or damaged whilst in their custody.
- Carriers: Like bailees, carriers have also got insurable interest in view of potential liability that might devolve on them for any mishap to the goods belonging to others, but whilst in their custody.
- Administrators, Executors & Trustees: They have insurable interest in view of responsibility put on them by law.
- Life: A person has got insurable interest in his own life. A husband has also got insurable interest in the life of his wife and vice-versa. No other relationship as such merits existence of insurable interest. However, insurable interest has been created upto 30 Pounds on the lives of parents, step-parents and grand-parents, under the Industrial Assurance & Friendly Societies Act, 1948 & 1958 of U. K., for meeting funeral expenses.
- Debtor and Creditor: A Debtor has insurable interest in his own life, but he has no insurable interest in the life of his Creditor. A Creditor on the other hand has insurable interest in his own life and he has also insurable interest in the life of his debtor to the extent of the loan, interest and something to cover up premium. This is because of the financial interest being created by advancing money.
- Insurers: They have got insurable interest because of a potential liability undertaken from the insured under a policy, and this justifies taking out a reinsurance policy.
- Liability: The creation of a potential liability justifies existence of insurable interest. The best examples are third party motor insurance, public liability insurance, employer’s liability insurance etc. It should be remembered that a person in the lawful possession of goods of another has got insurable interest
In the above I have given only 10 examples Of Insurable interest. But there may be more Examples Of Insurable interest which you are advised to study before the examination.
It should be remembered that a person in the lawful possession of goods of another has got insurable interest so long he is responsible for the goods. Mere possession without responsibility does not carry any insurable interest. Similarly a person having illegal possession of goods has got no insurable interest, e.g., thieves. One important point with regard to insurable interest is that it must be capable of being valued in terms of money.