Understanding insurance and some of the terms related to it can sometimes feel intimidating. But, if you do a little research you will see it isn't as difficult to understand as you may think.
This is a sponsored post with Mason Finance.
If you are in the market for insurance, you may have come across the term insurable interest and wonder exactly what it means. Insurable interest refers to the financial burden a person would be faced with when they lose someone or something that they have insured.
When relating to life insurance, it refers to how much a person will need financially should they lose their loved one, or the person that they have insured. Insurable interest can help you realize whether it is necessary that you should insure someone's life and by how much. The reason insurable interest exists is to prevent certain individuals from taking out insurance policies for the wrong reason, or those who would insure another individual for profit rather than purpose. An example of this would be someone getting insurance on their friend's 85 year old grandfather because he is old.
Insurable interest usually relates to family members that are related by blood or marriage. Some examples include siblings, married or engaged couples, parents, grand kids, children or other financial dependents. In special circumstances, insurance companies may allow extended family members like cousins, aunts, etc. as long as financial burden or hardship can be proven in the case of their loss or injury. An example of this would be if you are the last surviving relative of someone and need the policy to cover their funeral expenses.
Insurable interest is required when purchasing a life insurance policy and is needed in order to validate it. It is put in place to protect insurers from persons who try to obtain life insurance policies for invalid reasons, like betting on the life of another individual. In order to make a life insurance policy valid, a person must have proper insurable interest. You can always purchase insurance on yourself and choose whomever you would like the beneficiary to be. You can not insure another adult without their consent.
The best person to speak about insurable interest are your insurance provider or broker. Remember, life insurance was created to protect you and your loved ones from financial loss and hardship.
It definitely intimidates me to even start trying to dig into insurance because I feel so clueless about the terminology. This is good information, thanks.
ReplyDeleteWe have had life insurance for 30+ years on ourselves. It's good to know if either of passes away the other will have a little set aside in case they need it. It's so important.
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