Principle of Insurable Interest
The principle of insurable interest is another important legal principle. The principle of insurable interest states that the insured must be in a position to lose financially if a covered loss occurs. For example, you have an insurable interest in your car because you may lose financially if the car is damaged or stolen. You have an insurable interest in your personal property, such as a computer, books, and clothes, because you may lose financially if the property is damaged or destroyed.
Purposes of an Insurable Interest
To be legally enforceable, all insurance contracts must be supported by an insurable interest. Insurance contracts must be supported by an insurable interest for the following reasons.4
To prevent ...
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