Who must have insurable interest in the insured?

The concept of insurable interest is fundamental to the insurance industry. Insurable interest means that the person who takes out the insurance policy must have a legitimate interest in the continued life or well-being of the insured. This helps prevent insurance from being used as a betting tool or speculative investment.

In this context, the policy owner is the person or entity that purchases an insurance policy and is thereby responsible for paying the premium. They must have insurable interest in the insured, which means that the policy owner stands to suffer a financial loss if the insured individual dies or experiences a significant event that results in a claim. This requirement ensures that there is a valid reason for the insurance, reinforcing the integrity of the contract and helping to prevent moral hazard.

If the policy owner does not have an insurable interest, the contract could be deemed void, as the insurance would not serve its primary purpose of risk protection but instead could potentially lead to fraudulent behavior. Thus, insurable interest is necessary primarily for the policy owner, ensuring their financial stake in the life or health of the insured.