Insurable Interest
Definition:
A financial stake in property that would result in a loss if the property is damaged or destroyed.
Explanation:
Insurance policies require the policyholder to have an insurable interest to prevent fraud. This ensures only people who would suffer a financial loss can insure the property.
Example:
A homeowner has insurable interest in their house, but a random neighbor does not.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.