Question

Explain the term ‘Insurable Interest’ in a contract of marine insurance.

Hint:

No insurable interest = no valid claim — must have a legal stake in the goods or vessel.

Answer 1

Insurable Interest is a fundamental principle in marine insurance.
It means that the insured must have a legal relationship with the subject matter of the insurance.
In marine insurance, the policyholder must have an interest in the safety or preservation of the ship or cargo.
If any loss happens, the insured must suffer a direct financial loss to claim compensation.
For example, a ship owner, cargo owner, or freight holder has insurable interest in the goods being shipped.
Without insurable interest, the insurance contract is void and unenforceable in court.
Therefore, insurable interest ensures that the insured will not profit from the loss but will only be compensated for actual losses.