Insurable Interest in Life Insurance

Regional Insurance Acts have modified the rules governing insurable interest in life, representing an implicit acceptance that intervention is justified in the context of life insurance because of the overall public policy against the temptation for insurance to serve as an incentive/inducement to murder. Indeed it is a fundamental requirement of the contract of insurance that the insured must have an interest in the subject matter being insured. This interest, known as insurable interest, restricts what can be legally insured and distinguishes the contract of insurance from other commercial contracts. Considered one of the great outstanding principles in the formation of an insurance contract, the law ‘expressly prohibit[s] (mala prohibita) the making of contracts devoid of insurable interest, rendering them null and void.’ ¹ Prior to legislative intervention, wagering contracts where enforceable, it was common for insurance to be effected where the insured had no interest in the subject matter of the insurance. A series of eighteenth-century legislation designed to eradicate ‘mischievous gaming’ was introduced, which today still represents the foundation for the law of insurable interest in the Commonwealth Caribbean. ²