Insurable Interest – legal

provisions with
interpretation of Case
law
 INSURABLE INTEREST
 According to Patterson insurable interest is a relation
between the insured and the event insured against so that
occurrence of the event would result in substantial loss or
injury of some kind to the insured.
 The existence of insurable interest is an essential
ingredient of any insurance contract. It is a legal right to
insure arising out of a financial relationship recognized
under law, between the insured and the subject matter of
insurance. Insurable interest means an interest which can
be or is protected by a contract of insurance.
.
 New India Assurance Co. Ltd v. G.N. Sainani and New India
Assurance Company Limited v. Hira Lal Ramesh Chand &
Ors, wherein it was held that insurable interest over a
property is such interest as shall make the loss of the
property to cause pecuniary damage to the assured and
under this case it will make a damage to the interest of the
insured.
Characteristics of Insurable Interest
 There must be some subject-matter to insure, namely, the
life of a person, property like house, vehicle etc.;
 The insured must have some legally recognized
relationship with the subject matter of the insurance;
 The insured must be benefited by the safety of the
subject-matter and suffers loss if the subject-matter is
lost, damaged or destroyed.
 The subject-matter should be definite and it should be
capable of being valued in terms of money.
 Principle of Insurable Interest

 Financial interest of the person in the asset to be

insured.
 In order to insure something you must benefit from its
existence and suffer from its loss.
 You should have a legal relationship with the asset.
 You can insure your own house but not your neighbors'
house
 Wager and insurance

 In case of Alamani v. Positive Govt Security Life

Insurance Co the plaintiffs husband took a policy of
insurance on the life of Mehbub Bi, the wife of a clerk
working under him and about a week later got the policy
assigned in the favor of the plaintiff, Mehbub Bi died a
month later and the plaintiff as assignee claimed the sum
assured and in this case court find that there was no
insurable interest present in this case and hence this
insurance contract held to be contract of wager and held
to be void.
 Types of insurable interest
 Contractual
 Statutory
Where an insurance contract requires the existence of an insurable
interest for effecting the policy, such interest is known as Contractual
insurable interest while an insurable interest mandated by a particular
statute dealing on insurance is known as Contractual insurable interest.
As we have seen in some cases that interest in the subject matter of
insurance is required by law itself for the validity of the policy, whether
by express statutory law as in the Marine Insurance Act 1906 or as by
section 30 of the Indian Contract Act which merely declares that all
contracts by way of wager is void. This is the interest required by statue
or the statutory shareholder. If this agent is absent, the insurance is
illegal or void and no agreement between the parties dispensing with
this requirement can be effective
Insurable Interest in Life Insurance
 Insurable interest is the pecuniary interest; the insured
must have an insurable interest in the life to be insured
for a valid contract insurable interest arises out of the
pecuniary relationship that exists between the policy-
holder and the life assured so that the former stands to
lose by the death of the latter and/or continues to gain by
his survival.
Insurable Interest in Marine Insurance
 An insured person will have insurable interest in the subject-
matter where he stands in any legal or equitable relation to
the subject matter in such a way that he may benefit by the
safety or due arrival of insurable property or maybe prejudiced
by its loss, or by damage thereto or by the detention thereof or
may incur liability in respect thereof. If he fails to acquire an
insurable interest in due course, he does not become entitled
to indemnification. Since the ownership and other interest of
the subject matter often change from hands to hands, the
requirement of the insurable interest to be present only at the
time of loss makes a marine insurance policy freely assignable.
Conclusion
 The world we live in is full of hazards and uncertainty.
Individuals, families, businesses, buildings, and investments
are all vulnerable to various dangers. These include the
danger of losing one’s life, health, possessions, and property,
among other things. Insurance is a financial instrument that
lowers or eliminates the cost of a loss or the effect of a loss
caused by various risks. Provides financial security
throughout one’s life. An insurance policy relieves strain and
worry brought on by unforeseen negative situations. It makes
a significant contribution to living a stress-free existence.
THANKYOU