What Does Insurable Interest Mean?
Reader question:
What does the term ‘insurable interest’ mean?
Maggie
Thank you for your question, Maggie.
I’m surprised that I missed that one on my list of terms for California car insurance. If you’re confused about any other wording and want to look at the list, it’s a few posts down and explains all of the common terms used in the car insurance business. Now, I will get to the subject at hand.
An insurable interest is, essentially, when you have some sort of property which, if it were to be damaged or somehow lost, would also cause you some degree of financial harm. For example, if your house was severely damaged in a flood, then that house would be an insurable interest (before or after the flood) regardless of what you choose to do with the house itself. Maybe you decide to remain in its damaged surroundings and fix it up, which would be considered financial harm, or you sell it for less than its value was before the flood, which would also be categorized as financial harm. Either way, you would lose out, which is why we have California car insurance (and homeowner’s insurance).
What makes an interest insurable, according to California car insurance, is that it directly affects you. For example, if the person’s house across the street from you is flooded, but it doesn’t quite make it to your own house, then it isn’t considered an interest of yours. If you want to get an insurance policy for it, then the interest has to be something that is your own, and something that is insurable.
Cheers,
Fashun Guadarrama.
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