What is Insurable Interest on a Life Insurance Policy?

What is an Insurable Interest?

You can certainly find several definitions of Insurable Interest by Googling “ What is Insurable Interest”. My  goal is to explain it in plain simple terms without any Legal Verbiage.

For Life Insurance – Insurable interest is best defined as a person or Business Associate ( Key Man Life Insurance)  who has an emotional and financial interest in the insured and this person / Business Associates, would have an interest in the insureds well being. Insurable interest is generally for close family members or a Business Associate(s).  Close family members would include – Spouse, Children, Siblings, Grandparents.

Insurance companies will generally not allow Cousins, Nieces/Nephews, Aunts/Uncles , Step Children, In Laws etc  to purchase Life Insurance or own a Life Insurance policy on the insured under these relationship conditions. However, there are always exceptions to these rules so it is always best to ask.

Insurable interest only comes into play when someone ,other than the insured , wants to own and/or pay for a policy.