A legal and financial stake in the continued existence or well-being of the person or property being insured. You must have insurable interest to purchase insurance — for example, you have insurable interest in your own home, car, or your own life and the lives of close family members.
Related Terms
Moral Hazard
The risk that having insurance may encourage riskier behavior because the policyholder does not bear the full cost of a loss. Deductibles and coinsurance are common tools insurers use to reduce moral hazard by keeping policyholders financially invested in preventing losses.
Named Insured
The person or entity specifically listed on an insurance policy as the primary covered party. The named insured has certain rights and responsibilities, including the authority to modify the policy, file claims, and receive notices from the insurer.
Underwriting
The process insurers use to evaluate the risk of insuring a person or asset and determine the appropriate premium. Underwriters review applications, claims history, credit scores, and other data to decide whether to issue a policy and at what price.