Chapter 4 Insurable interest

Question 1

Provide a definition of insurable interest

Answer 1

“the legal right to insure arising out a financial relationship recognised at law between the insured and the subject matter of insurance.”

Question 2

What three elements are required for insurable interest to exist

Answer 2

Subject matter
Legal relationship
Financial value

Question 3

What is the difference between the subject matter of insurance and the subject matter of the contract in household insurance?

Answer 3

The house is the subject matter of insurance

The house owner’s financial interest in the house is the subject matter of the contract

Question 4

When must insurable interest exist in marine insurance?

Answer 4

At time of loss only

Question 5

When must insurable interest exist in life insurance

Answer 5

Only at inception not at time of loss

Question 6

When must insurable interest exist in property and other insurances

Answer 6

At inception and time of loss

Question 7

Identify three ways insurable interest can be created

Answer 7

Common law e.g. ownership
Contract e.g. lease gives tenant responsibilities
Statute eg Repair of Benefices Building Measures Act (1972) requires upkeep of building

Question 8

Who may have an insurable interest in property insurance?

Answer 8

Owners
Part or joint owners (for their share)
Agents
Bailees (who look after others property)
Tenants (who rent property)

Question 9

In what does the insured have insurable interest in liability insurance?

Answer 9

Their potential liability to pay legal costs and damages