What is Insurable Interest?
The purpose of insurance is to return you to the same financial position after a loss as you were in before the loss occurred.
Therefore if you will not suffer financially from the loss of or damage to property (a car or an item in your home) then you cannot insure that property. To put this another way, you must have an insurable interest in the property you propose to insure.
It is obvious that if you own something, having paid for it, then you have an insurable interest in it. If someone steals your bicycle you will suffer financially from that loss.
In a lot of cases ownership isn’t just as clear cut as this. What if you have a mortgage on your home? The bank or building society has a financial interest in the property. What if your car has been leased to you? A finance company may well be the owner of the car.
The terms of your mortgage and leasing agreement on your car will probably make you responsible for the upkeep of the property. It may actually be a condition that you insure the property. In these circumstances you have a clear insurable interest in the property.
There are circumstances in which you can insure property that you clearly do not own.
You may have asked for a temporary car loaned to you by a garage to be placed on cover by your insurer while your own car is being repaired or serviced. Your insurer will have agreed to do so on the basis that the garage will hold you responsible for any loss or damage that occurs whilst the car is in your possession. For similar reasons Allianz Home insurance policies cover property owned by visitors and guests of insured persons.
To sum up, if you stand to lose financially from loss or damage to property then you have an insurable interest in it.
About the author:Business Owner, Consultant and Expert Witness. Former Motor and Property Insurance Underwriter.
Date:April 26th, 2018