Insurable Interest

Definition

• An asset or something of worth that an entity derives some form of benefit from and would have a reason to insure for its loss. For physical assets, insurable interest typically only exists for things the entity has partial or full ownership of. For example a person could apply for insurance coverage on their home, but not their neighbour's home. Likewise, an individual could take out a life insurance policy for a spouse or a business partner but not a complete stranger.

Synonyms
legitimate insurable interest, right to insure, stake, vested interest

Related Terms and Acronyms

• Adequacy of Coverage — Definition,
  • An assessment of how well an entity's property and assets are insured against potential losses.
• Business Continuation Insurance — Definition,
  • Insurance that provides coverage in the event that someone integral to the operation of a business dies or becomes disabled.
• Business Life Insurance — Definition,
  • Life insurance that provides coverage in the event that a person key to the operation of a business dies.
• Entity-Purchase Agreement — Definition,
  • A plan used for businesses with multiple owners where insurance policies are taken out for each owner in the amount of their ownership stake.
• Financing Entity — Definition,
  • An entity that purchases an insurance policy or settlement contract.
• First Loss Insurance Policy — Definition,
  • An insurance policy where the policyholder under-insures their assets and will only receive partial coverage in the event of a loss.
• Insurance Policy — Definition,
  • A legal contract between an insurer and entity that specifies what the insurer is required to cover and any benefits the insured entity is entitled to.
• Life Insurance — Definition, Very Important,
  • An arrangement where an insurer agrees to pay a benefit to one or more beneficiaries in the event of the policyholder's death.
  ➥ CanEquity offers life insurance.
• Loss Payable Clause — Definition,
  • An insurance policy provision for payment of a claim to someone, other than the insured's interest in the insured property. This clause basically allows an insurer to make payments to a third party in certain circumstances.
• Property Insurance — Definition,
  • Insurance that provides coverage for damages to property from a number of perils.
• Single Interest Insurance — Definition,
  • Insurance that covers a single party when more than one party has a stake in a property.
• Stranger Originated Life Insurance (STOLI) — Acronym,
  • A life insurance policy purchased by someone without any insurable interests with the insured person.
  ➥ Illegal in many Canadian provinces.
• Underinsurance — Definition,
  • When the amount of insurance coverage on an asset is less than the asset's full value.
• Valuable Papers Insurance — Definition,
  • Insurance that covers damages to valuable papers such as property deeds or wills.
• Value Reporting Form — Definition,
  • A form used to keep track of a business's current inventory value.
• Work and Materials Clause — Definition,
  • A provision that allows the policyholder to store certain materials in insured property if needed by their line of work.