Jargon Buster - Definition of Insurable Interest

Please select your letter of choice below to see the list of terms:

Insurable Interest

represents the relationship between the life assured and the policyholder or between two policyholders for an insurance contract. It can also indicate the reason why a policy is being set up on a specific individual.

Insurable Interest helps the insurance company to assess the risk and validity of a policy and can help to avoid fraudulent and unrealistic policies from being established.

Following are some examples where there is no insurance interest and therefore little likelihood of, say a life insurance being offered:

  • Life Insurance for somebody under the age of 16, as there would be no financial loss from losing a child.
  • Offering £2,000,000 life insurance to an individual with no assets, saving or children and an annual income of £12,000. With this scenario, there isn't an insurable interest for £2,000,000 worth of cover and the insurance company would likely decline an application for this reason.
  • A person taking out life insurance on somebody that they have no connections with, i.e. there is not personal or business relationship.

Please note that all definitions are intended for general guidance only. For official and current definitions you should always double check your policy wording.

If you are in doubt of the meaning of any terms, why not email us on