132:. The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
150:. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S.
144:. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
163:. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
138:. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be 'pure', in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
223:
For purposes of life insurance, close relatives are assumed to have an insurable interest in the lives of those relatives, but more distant relatives, such as cousins and in-laws cannot buy insurance of the lives of others related by these connections. Thus, a married person has an insurable interest
227:
In the U.K. a person is considered to have an unlimited interest in the life of their spouse, which the law considers broadly equivalent to having an insurable interest in their own life. Even if not financially dependent on the other, it is legitimate to insure against the death of a spouse.
193:. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the
177:, meaning that the one losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5
52:. This is because the probability is so high for the individual to die within the term of the insurance, that he/she would present far too high a liability for the insurance company. A similar, and stereotypical, example would be
24:
can mean either whether a particular type of loss (risk) can be insured in theory, or whether a particular client is insurable for by a particular company because of particular circumstance and the quality assigned by an
232:
couples, they could potentially be invalidated. In recent years, there have been moves to pass clear statutory provisions in this regard, which have not yet borne fruit. Similar treatment was recently extended to
126:, which is famous for insuring the life or health of actors, actresses and sports figures. However, all exposures will have particular differences, which may lead to different rates.
118:. Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the
224:
in the life of their spouse, and minor children have an insurable interest in their parents. A person is also presumed to have an insurable interest in his or her own life.
251:. Often there is no requirement today that the beneficiary have a proven insurable interest in the life of the insured when the insured has purchased the insurance.
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Nurnberg, Hugo; Lackey, Douglas P. (November 2010). "The Ethics of Life
Insurance Settlements: Investing in the Lives of Unrelated Individuals".
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Insurable interest is no longer strictly an element of life insurance contracts under modern law, for example with viatication agreements and
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284:(1st ed.). Malvern, Pa.: American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America. p. 6.3.
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Encyclopedia of
Nanoscience and Society, edited by David H. Guston, Sage Publications, 2010; see Articles on Insurance and Reinsurance.
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is insured by the federal government. An instance where the question whether insurability exists is contested is the case of
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Jaffee, Dwight M.; Russell, Thomas (June 1997). "Catastrophe
Insurance, Capital Markets, and Uninsurable Risks".
40:, and an insurance company will refuse to issue a policy to such an applicant. For example, an individual with a
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Swisher, Peter N. (2004). "The
Insurable Interest Requirement for Life Insurance: A Critical Reassessment".
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Insurable interest refers to the right of property to be insured. It may also mean the interest of a
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Risks that can be insured by private companies typically share seven common characteristics.
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policy to prove need for the proceeds, called the "insurable interest doctrine".
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in which predicted losses are similar to the actual losses. Exceptions include
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Questions and answers on life insurance : the life insurance toolbook
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413:(3rd ed.). Alameda, CA: Life Insurance Sage Press. p. 151.
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Salzman, Gary I. (1965). "Insurable
Interest in Life Insurance".
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379:(8th ed.). Homewood, Ill.: R.D. Irwin. pp. 34–37.
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as well as wind insurance in hurricane zones. In the U.S.,
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An individual with very low insurability may be said to be
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Risk behaviour and risk management in business life
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228:Although many insurers will accept policies of
181:. Capital constrains insurers' ability to sell
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167:Limited risk of catastrophically large losses
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282:Foundations of risk management and insurance
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309:. Dordrecht: Kluwer Academic Publishers.
75:. It also comes up in issues involving
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116:Large number of similar exposure units
63:Insurability is sometimes an issue in
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48:of 6 months would be uninsurable for
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152:Financial Accounting Standards Board
305:Vivian, R.W.; Darius, W.I. (2000).
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613:Accidental death and dismemberment
107:Characteristics of insurable risks
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482:Married Women's Property Act 1882
332:The Journal of Risk and Insurance
739:Directors and officers liability
169:. Insurable losses are ideally
33:that a given client would have.
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237:under section 253 of the
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409:Steuer, Anthony (2010).
375:Mehr, Robert I. (1985).
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698:Variable universal life
508:Scottish Law Commission
377:Principles of insurance
1363:Health insurance costs
764:Professional liability
497:; Cohabitation, s. XVI
1219:Out-of-pocket expense
1080:Workers' compensation
734:Collateral protection
724:Business interruption
436:Insurance Law Journal
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495:Report on Family Law
475:Griffiths v. Fleming
183:earthquake insurance
120:law of large numbers
54:earthquake insurance
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1393:Mesopotamian banker
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155:standard number 113
50:term life insurance
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754:Payment protection
655:Payment protection
502:2007-09-27 at the
208:Insurable interest
202:Insurable interest
148:Affordable Premium
91:, insurability of
29:pertaining to the
27:insurance provider
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243:
226:
222:
211:
175:catastrophic
166:
160:
147:
141:
135:
129:
115:
110:
62:
37:
35:
22:Insurability
21:
20:
18:
1516:Trade union
1471:Cooperative
1144:Uncertainty
1003:Index-based
971:Multi-peril
929:Reinsurance
888:Public auto
793:Residential
214:beneficiary
195:reinsurance
171:independent
89:real estate
38:uninsurable
1311:by country
1309:Insurance
1283:Total loss
1204:Deductible
1165:Cash value
1109:Act of God
1094:Insurance
1008:Parametric
988:Expatriate
864:Transport/
830:Landlords'
815:Earthquake
703:Whole life
623:Disability
338:(2): 205.
267:References
246:charitable
230:cohabiting
187:flood risk
142:Large Loss
101:marketable
95:means the
58:California
1457:Syndicate
1423:Collegium
1318:Australia
1273:Risk pool
1243:Indemnity
1214:Copayment
1148:Knightian
1060:Terrorism
1030:Liability
898:Satellite
759:Pollution
683:Term life
592:insurance
590:Types of
583:Insurance
542:154448132
340:CiteSeerX
249:donations
73:contracts
1560:Category
1537:Category
1415:§275–277
1333:Pakistan
1181:Pro rata
1070:War risk
1035:No-fault
946:Casualty
903:Shipping
873:Aviation
850:Renters'
845:Property
840:Mortgage
810:Contents
784:Umbrella
744:Fidelity
712:Business
608:Accident
500:Archived
478:1 KB 805
255:See also
173:and non-
77:tontines
65:case law
1462:Benefit
1449:Digesta
1385:History
1119:Actuary
1075:Weather
1065:Tuition
1055:Takaful
983:Deposit
913:Vehicle
197:market.
179:percent
1338:Serbia
1298:Profit
1170:Broker
1096:policy
908:Travel
893:Marine
800:Boiler
774:Surety
618:Dental
600:Health
540:
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417:
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362:253729
360:
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288:
97:realty
44:and a
1434:Guild
1328:India
1323:China
1192:Claim
998:Group
978:Cyber
956:Crime
922:Other
855:Title
820:Flood
538:S2CID
358:JSTOR
216:of a
93:title
69:torts
1407:§234
1129:Risk
1099:and
961:Crop
825:Home
719:Bond
665:Life
440:1965
415:ISBN
381:ISBN
311:ISBN
286:ISBN
87:and
79:and
71:and
31:risk
1101:law
1040:Pet
530:doi
350:doi
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67:of
56:in
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1413:;
1409:;
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526:96
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506:,
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462:53
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448:^
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336:64
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1464:/
1146:/
575:e
568:t
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352::
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294:.
157:)
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