ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Insurable interest just means that the subject matter of the contract must provide some financial gain by existing for the insured (or policyholder) and would lead to a financial loss if damaged, destroyed, stolen, or lost.

Detailed explanation-2: -Principle of Utmost Good Faith.

Detailed explanation-3: -Principle of Utmost Good Faith The fundamental principle is that both the parties in an insurance contract should act in good faith towards each other, i.e. they must provide clear and concise information related to the terms and conditions of the contract.

Detailed explanation-4: -An example of insurable interest is a policyholder buying property insurance for their own house but not for their neighbour’s house. The person does not have an insurable interest in any financial loss arising from damage to their neighbour’s house.

Detailed explanation-5: -Insurable interest refers to an investment that protects anything subject to a financial loss. A person or entity may have an insurable interest in an event, item, or, action when the loss or damage of the insured object or person can cause a financial loss.