Insurable Interest: Who Can You Legally Insure?

Insurable Interest: Who Can Get Insured—And Who Won’t!

Quick Summary:
You can't just take out an insurance policy on anyone you like. "Insurable interest" is a core rule in insurance that decides who you’re allowed to insure—and more importantly, why. If this concept didn’t exist, well… things could get a little messy.

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Let’s be honest—insurance isn’t something most people get excited about. It's usually something we buy, then forget about… until life reminds us why we needed it in the first place.

But here's a thought: Can you insure your boss? What about your best friend? Your ex?

Hmm… tempting, but no.

That’s where insurable interest comes in—a legal, ethical filter in the world of insurance that decides who can be covered and who just can’t.

💡 What Exactly Is “Insurable Interest”?

Put simply, insurable interest means you should only be able to insure someone if their loss would cause you a genuine financial or emotional setback.

No selfish motives. No betting on someone’s life.

If the person you’re insuring passes away—or faces a covered event—you must stand to lose something meaningful: income, support, a debt, a family bond.

“You can’t insure someone else’s life like it’s gambling. Insurance is meant for protection—not speculation.”

✅ Who Can You Insure?

Here are common examples where insurable interest exists at the time of buying the policy:

• Yourself: Obvious. You can always buy insurance for your own life, health, accident, etc.
• Spouse: You both rely on each other emotionally and financially. This one’s easy.
• Children or Parents: If you’re financially dependent on your parents, or vice versa, there’s insurable interest. But insurers may ask for proof of dependency—especially in case of adult children.
• Business Partners: If your business partner’s death would impact operations or cash flow, you can insure their life—with proper legal backing (like a keyman policy or partnership agreement).
• Employer–Employee: Common in corporate group insurance or key person policies. The employer must prove financial impact in case of the employee’s loss.
• Loan Guarantor / Borrower: If you’ve guaranteed someone’s loan, and their death would make you liable—that’s a strong case for insurable interest.

❌ Who Can’t You Insure?

Here’s where it gets tricky—and often misunderstood:

• Friends, Colleagues, Neighbours: No matter how close you are personally, unless there’s financial dependency or legal backing, insurers won’t issue a policy.
• Ex-spouses (usually): Unless there's a court order involving alimony or financial obligation, the bond is considered broken.
• Random Relatives: Uncles, cousins, or in-laws can’t be insured unless you can clearly prove you’d suffer a financial loss.
• Celebrities or Public Figures: Nope. You can’t insure Shah Rukh Khan—even if you think his absence would break your heart.

🕰️ When Does Insurable Interest Need to Exist?

Life insurance: Insurable interest must exist at the time the policy is taken.

General insurance: It must exist both at the time of buying AND at the time of claim.

So if your financial relationship ends later (say you divorce or sell a property), it might affect your claim rights—especially for non-life policies.

🔍 Real-Life Example from My Practice

A gentleman once asked me if he could take a term insurance policy on his 26-year-old son who was working in another city and not financially supporting the family.

Tough conversation. But as I gently explained, unless the son is contributing money to the household, there’s no insurable interest. The insurer will likely decline the proposal—or require strong justification.

✅ FAQ: Common Doubts I Hear Offline

Q: Can a housewife be insured if she doesn’t earn?
A: Yes, absolutely. Homemakers contribute immensely through unpaid labour. Most insurers now allow coverage, often linked to the earning spouse’s sum assured.

Q: Can siblings insure each other?
A: Only if one is financially dependent on the other. Just being family isn’t enough.

Q: What about joint loans?
A: Yes! If you’ve taken a loan jointly, both parties can (and should) insure each other.

🪶 Final Thought

Insurance isn’t just paperwork—it’s a relationship of trust. And trust only makes sense where there’s a real connection, whether emotional or financial.

So next time you think, “Can I insure this person?”—ask yourself:
Would I actually suffer a loss if they weren’t around?

If the answer is yes, you’re probably on the right side of the rulebook.

And if you’re still unsure, well… maybe it’s time we had an offline chat. I’m always around to help you make these decisions—not just by the book, but with real-life context.