Insurable interest

Insurable interest in life exists when there is reasonable ground founded on the relation of the parties,
either pecuniary or contractual or by blood or affinity, to expect some benefit or advantage from the
continuance of the life of the insured.

In general (except in life insurance policies), a person is deemed to have an insurable interest in the
subject matter insured where he has a relation or connection with or concern in it that he will derive
pecuniary benefit or advantage from its preservation and will suffer pecuniary loss from its destruction
or injury by the happening of the event insured against.

Difference of insurable interest in life and property

INSURABLE INTEREST IN LIFE INSURABLE INTEREST IN PROPERTY

Must exist only at the time the policy takes Must exist at the time the policy takes effect and
effect and need not

exist at the time of loss when the loss occurs

Unlimited except in life insurance effected Limited to actual value of interest in property
by creditor on life of debtor. insured.

The expectation of benefit to be derived An expectation of a benefit to be derived from the

from the continued existence of life need continued existence of the property insured must
not have any legal basis whatever. A have a legal basis.
reasonable probability is sufficient without
more.

The beneficiary need not have an The beneficiary must have insurable interest over
insurable interest over the life of the the thing insured.
insured if the insured himself secured the
policy. However, if the life insurance was
obtained by the beneficiary, the latter
must have insurable interest over the life
of the insured.

Misrepresentation - Getting into a contract with a person or a company on false grounds by making
statements that are not in accordance with the facts is known asmisrepresentation. In
an insurance policy, misrepresentation on the behalf of theinsured gives the insurance company a right
to terminate the policy.

Concealment –failure or neglect in the giving information the insured knows or ought to know.

Concealment vs Misrepresentation

Concealment on the part of the insured has the same effect as a misrepresentation and gives the
insurer the right to rescind the contract. Whether intentional or not intentional, the injured party is
entitled to rescind the contract of insurance on ground of concealment or false representation.

Rider/Endorsement- is an insurance policy provision that adds benefits to or amends the terms of a
basic insurance policy. Riders provide insured parties with options such as additional coverage, or they
may even restrict or limit coverage.

There is an additional cost if a party decides to purchase a rider. Most are low because they involve very
little underwriting.

A rider is also referred to as an insurance endorsement. It can be added to policies that cover life,
homes, autos, and rental units.

It is an amendment or addition to an existing insurance contract which changes the terms or scope of
the original policy. Endorsements may also be referred to as riders. An insurance endorsement may be
used to add, delete, exclude or otherwise alter coverage.

Incontestable clause- A provision in a life or Health Insurance policy that precludes the insurer from
alleging that the policy, after it has been in effect for a stated period (typically two or three years), is
void because of misrepresentations made by the insured in the application for it.

Constructive total loss- is when the cost for repair of an item (e.g., house, boat or car) is more than the
current value of that item. It also refers to the insurance claim that is settled for the full value of the
associated coverage.

Jettison - A Marine Insurance term referring to the throwing of cargo overboard to lighten the ship in
order to save it from sinking.