Insurable interest
Produced in partnership with Dr Franziska Arnold-Dwyer of University College London
Practice notesInsurable interest
Produced in partnership with Dr Franziska Arnold-Dwyer of University College London
Practice notesThis Practice Note considers insurable interest, including insurable interest in construction and liability insurance. It also considers insurable interest in subrogation, co-insurance and double insurance and the Insurable Interest Bill.
What is insurable interest?
‘Insurable interest’ refers to a doctrine of insurance contract law that requires the insured to have a relationship with the insured subject-matter that is recognised by law. Broadly speaking, only persons who have some relation to the subject-matter of the insurance contract, by reason of which they would be prejudiced by its loss, or may incur liability in respect thereof, can insure that subject-matter. Conversely, a person who has no such relationship does not have any insurable interest and therefore cannot take out insurance on that subject-matter. The burden rests on the insured to prove an insurable interest exists.
The historic rationales for requiring an insurable interest are that:
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it is characteristic of an insurable interest that distinguishes an insurance contract from wagering contracts (the ‘anti-wagering rationale’)
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an insurable interest is thought to reduce the moral hazard posed by the insured taking
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