Who must have insurable interest in the insured?

The requirement of insurable interest is a fundamental principle in insurance, especially in life insurance. Insurable interest means that the policy owner must have a legitimate interest in the continued life of the insured, which helps prevent insurance from being used as a gambling mechanism or for immoral purposes.

The policy owner is the individual or entity who has purchased the insurance policy and is responsible for its premiums. This interest can arise from various relationships, such as familial ties, financial stakes, or other connections that would cause the policy owner to suffer a financial loss upon the death of the insured. This principle ensures that the policy owner is likely to suffer a genuine economic loss should the insured pass away, thus justifying the need for insurance.

On the other hand, while beneficiaries may benefit from the policy when the insured dies, they do not necessarily need to have insurable interest at the time the policy is issued. In some cases, the insurer takes on the risk purely based on the contractual agreement and does not have an insurable interest in the insured's life. Therefore, the policy owner's insurable interest is vital for the validity of the life insurance contract.