What is meant by the term, ‘Insurable Interest’?

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The policyholder would have an ‘insurable interest’ in a car or a property, when a damage or loss to it would cause a financial or other types of loss to that person. If the vehicle is damaged by an accident or is stolen, that occurrence would result in a reduced or nil value to that person. The insurable interest is designed to compensate the policyholder for the damage or the loss to the car or the property. If the car of a neighbor is damaged, there is only an emotional feeling that the policyholder would have about the loss but there would not be any financial loss. However, when the car of the policyholder is lost or damaged, there is definitely a financial loss. This loss is termed as ‘insurable interest’.