ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A person or entity has an insurable interest in an item, event, or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item, or event in question.

Detailed explanation-2: -Insurable interest means an individual receives a financial or other type of benefit from the continued existence of the person insured. Thus, if the person insured were to pass away, the surviving person would experience a financial loss or other hardship.

Detailed explanation-3: -For example, a spouse who relies on their partner for finances has an insurable interest. Furthermore, anyone who will suffer a financial loss given a specific individual’s passing would have an insurable interest.

Detailed explanation-4: -The principle of insurable interest on life insurance is that a person or organization can obtain an insurance policy on the life of another person if the person or organization obtaining the insurance values the life of the insured more than the amount of the policy. In this way, insurance can compensate for loss.

Detailed explanation-5: -There are two types of insurable interest: contractual and statutory.