Insurable Interest

This principle is an important element within a contract of insurance. It means that the insured must have an interest in the subject matter of the insurance.

When does insurable interest exist?
The courts have confirmed that this common law principle is still relevant and that the insured is under an obligation to prove that he or she had an insurable interest at the time of loss.

An insurable interest exists when a person benefits by an insured event not occurring, or is prejudiced by the occurrence of the event.

In a practical sense this means that the insured must suffer a financial or economic loss. This also means that the interest in the property must be a real one and not a contrived one. The question you need to ask is, "Who is the beneficial owner of the property?" Or, "Who stands to lose if an event that is insured against occurs?"

When does an insurable interest not have to be shown?
At the time the insurance is arranged there is no requirement to show that an insurable interest exists. This was abolished under Sections 7 and 15 of the Insurance law Reform Act 1985

When does insured person does not have good title to a property?
Examples of when an insured does not have good title to a property or item are:

  • Stolen property
  • Pirated goods such as illegally copied computer software
  • Goods that have been imported illegally.

Is the lack of insurable interest a technical defence for denying a claim?
This is no longer available in domestic policies. However, if a person tries to claim for an item that he or she did not own then they would not have suffered a loss. In some situations the courts have said that 'ownership' is against the public interest and they have declined to uphold a claim on that basis.

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