Insurable Interest
Overview
You may insure your own car, but you may not insure your neighbour's. You may insure your own life for any amount, yet you may insure a stranger's for nothing at all. The rule that draws this line is insurable interest, and it is what separates a genuine insurance contract from a bet. Without it, a policy is not merely unpaid at claim time: in law it never existed.
This lesson explains what insurable interest is, the essential features the law looks for before it recognises the interest, and the one point examiners test most: the exact moment the interest must be present, which differs for life, for marine and for fire and motor cover. You will apply the rule to decide who may validly insure what, and see why a policy taken out without it is simply void.
Objectives
- Define insurable interest and explain why the law requires it
- State the essential features that must be present before insurable interest exists
- Explain when insurable interest must attach in life, marine and property insurance
- Apply insurable interest to decide whether a named person may validly insure a stated subject matter
- Explain the consequence of effecting a policy without insurable interest
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Insurable Interest. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Insurable interest is best described as: A. The premium a person pays for a policy B. A legally recognised financial stake a person has in the thing insured C. The profit an insurer makes on a contract D. The affection a person feels for another Answer: B
- In which class of insurance must insurable interest exist only at the time of loss? A. Life assurance B. Fire insurance C. Marine insurance D. Motor insurance Answer: C
- A creditor lends 1,000,000 naira at an agreed interest of 200,000 naira. The maximum insurable interest the creditor has in the debtor's life is: A. 1,000,000 naira B. 200,000 naira C. 1,200,000 naira D. 800,000 naira Answer: C
- A policy effected without any insurable interest is: A. Valid but non-transferable B. Void and treated as a wager C. Payable only in part D. Converted into a life policy Answer: B
- Which of the following persons does NOT have an insurable interest? A. A husband in the life of his wife B. A dry cleaner in the clothes left in his custody C. A man in the new car of a colleague he admires D. A joint owner in the jointly owned house Answer: C
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Recommended Books
Past Questions
Wondering what past questions for this topic looks like? Here are a number of questions about Insurable Interest from previous years
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