[I074]

insurable interest

A potential for financial loss from a certain event which a person must have before acquiring insurance against that event. The event may be illustrated by the following: the destruction of property owned (in fire insurance); the incurring of legal liability for negligence in causing loss to others (in liability insurance); the compliance with law (in workers compensation insurance); the loss or impairment of human life value (in life insurance, disability insurance, and annuities); or expenses fortuitously incurred (in hospitalization insurance). In life insurance, the applicant of the policy must suffer a financial loss, or the loss of love and affection, by the death of the insured.

(See interest.)