What are the significance of insurable interest?

The significance of insurable interest.

The contract of insurance came into existence when the assured has an insurable interest in the subject-matter of insurance. This serves as in important element of insurance and as such insurance without insurable interest is inoperative. Insurable interest denotes the legal right to insure. The insured is so situated with regard to the things in such a manner that he would have benefit from its existence and loss from its destruction.

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The following are the broad essentials of insurance interest:

  • There must be a physical object which is subject to risks.
  • It must be capable of measurement.
  • The insured must have a legal relationship with regard to the subject matter.
  • The physical objects of a thing must be treated as the subject matter of insurance.
  • There must be a potential liability.


In life insurance, insurable interest exist at the time of making contract. In fire insurance, it exist both at the time of making contract and incurring losses. In other insurance contracts, insurable interest exist at the time of loss only.

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