The prerequisite for any insurance cover is that the person who takes out a policy must possess an insurable interest in the subject matter of the insurance.
Insurable Interest in case of a life insurance policy is required by statute in England. In US, it is required by the Assurance Act of 1774 and in India as a matter of public policy.
Insurable interest in India does not necessarily remain confined to a pecuniary interest. An interest based on close family bonds may also constitute an insurable interest. This is also applicable to certain US States like New York and Pennsylvania.
Many Courts have stated that life insurance is not a contract of indemnity and that it is quite satisfactory if insurable interest exists at the time of the contract and not at the time of the loss. This general principle has been adopted by some courts in US as well.
