What is the principle of insurable interest?
Insurable interest is a core principle in insurance. The financial stake that you have in insuring something you ownfor instance, your caris termed insurable interest'. Any damage to the car will result in financial loss to you, making it a valid case of insurable interest. In case of life insurance, a policyholder has to demonstrate insurable interest while naming beneficial nominees in the policy. For example, surviving spouses, parents or children will suffer a financial setback, besides emotional loss, if the breadwinner passes away. So, the objective of buying a term cover is to replace this income. Nominating someone other than close relatives will usually invite questions from insurers.