The principle of insurable interest is important because it:
A) makes insurance companies more profitable
B) supports the principle of indemnity
C) prevents insurers from unfairly denying insurance claims
D) prevents an insurer from subrogating against a negligent third party

Question

Quizplus · Accepted Answer

The principle of insurable interest is important because it supports the principle of indemnity. Indemnity means that an insured should not profit from an insurance policy but rather be returned to the same financial condition they were in prior to the loss. Insurable interest ensures that the insured has a financial stake in the item or person being insured, making it more likely that their losses in the event of a claim can be accurately calculated and indemnified.

The Principle of Insurable Interest Is Important Because It