PRINCIPLE OF INSURABLE INTEREST :

• The insured must have insurable interest n the subject matter of insurance.

• In life insurance it refers to the life insured.

• In marine insurance it is enough if the insurable interest exists only at the time of occurrence of the loss.

• In fire and general insurance it must be present at the time of taking policy and also at the time of the occurrence of loss.

• The owner of the party is said to have insurable interest as long as he is the owner of it.

• It is applicable to all contracts of insurance.

The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. A person has an insurable interest when the physical existence of the insured object gives him some gain but its non-existence will give him a loss. In simple words, the insured person must suffer some financial loss by the damage of the insured object.

For example: The owner of a taxicab has insurable interest in the taxicab because he is getting income from it. But, if he sells it, he will not have an insurable interest left in that taxicab.

From above example, we can conclude that, ownership plays a very crucial role in evaluating insurable interest. Every person has an insurable interest in his own life. A merchant has insurable interest in his business of trading. Similarly, a creditor has insurable interest in his debtor.