Insurance Law - Insurable Interest - Essay Example

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Course: Year: Subject: Insurable Interest Student: Tutor: Introduction One of the areas of insurance law that we’ll be analyzing is insurable interest, where the property, object or person to be insures should be of some interest to the insurer and that they would incur a loss of damaged or destroyed, or in the case of a person, the person dies or suffers a disability…
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Insurance Law - Insurable Interest
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Download file to see previous pages Before insurance companies came up with regulations regarding issuance of policies people would take life policies on other people, and if the insured was to surpass the expected life expectancy, some insurers tended to “help them along” so as to get their claims. This presented moral hazards and created to need to come up with insurable interests. Analysis In property insurance when a policy is to be taken, insurance companies ensure that insurable interest is shown to the property. In a case where no loss was incurred, then the insurer is not paid anything (Evans 1912). Insurable interest also serves to reduce intentional losses and damage, before this was enforced, people used to take out policies on property and intentionally destroy the property so as to get the claim, but with insurable interest when the insurer has taken a policy on a property that they have an interest in, they are less likely to intentionally cause damage to it. This serves to significantly reduce the number of bogus claims. The issue of valuation also arises, being that some policies will only pay of the value of the property even with insurable interest; the valuation question is still unresolved and highly controversial. The main difference in the application of insurable interest in property insurance and life insurance is that, when it comes to property, it proves essential. For example, if an insurance policy of 100.000 is taken on a house, at a premium of 300 per year. If the insurer doesn’t lose anything if the house is destroyed, then the insurer will be betting 300 every year that something happens to the house. Insurance policies should not be incentive for people to destroy property, just to claim. Non indemnity insurance, valued insurance, is when the policy holder is entitled to a certain amount if the insured property is damaged. If insured against fire, even if the fire does not do as much damage, the insurance still pays the claim. The contrast comes is life insurance where the insurance should change the insurable interest policy and change it with, the right to give consent, although this might be a bit complex, as in the example of someone who takes life insurance and sells it, as seen if the case of Arthur Kramer who took a life insurance policy of 56 million dollars and sold it to investors. When he died, his family could not claim anything, this led to long court battle for ownership. Life insurance, which engulfs other aspects as critical illnesses or accident, may be taken by a person on themselves for any amount. The law also allows one to take out a policy on a spouse or civil partner recognized by law (Dobbyn 2003). It does not however cater for natural affection or cohabitants. Therefore the law requires that for one to take a life insurance policy on another there must be reasonable interest, but this begs the question, how much interest? And how does one get to measure this? It comes down to the degree, which creates ambiguity. Although the law permits the insurance of a spouse, it does not have further specifications like, if the spouse is abusive, or is abused, should the allow for giving of consent. The law also holds that if you have pecuniary interest in a person you can take a life policy on them, for example business partner because the law will likely permit this, but then the business might fall, or a fallout occurs. Then there will be no more interest ...Download file to see next pagesRead More
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