143:. 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.
161:. 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.
155:. 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.
174:. 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.
149:. 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.
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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
238:
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.
204:. 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
188:, 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
63:. 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
35:
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
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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
137:, 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.
129:. 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
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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.
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262:. 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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295:(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".
51:, 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
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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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424:(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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390:(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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293:Foundations of risk management and insurance
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320:. Dordrecht: Kluwer Academic Publishers.
86:. It also comes up in issues involving
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127:Large number of similar exposure units
74:Insurability is sometimes an issue in
59:of 6 months would be uninsurable for
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163:Financial Accounting Standards Board
316:Vivian, R.W.; Darius, W.I. (2000).
624:Accidental death and dismemberment
118:Characteristics of insurable risks
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180:. Insurable losses are ideally
44:that a given client would have.
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248:under section 253 of the
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420:Steuer, Anthony (2010).
386:Mehr, Robert I. (1985).
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508:; Cohabitation, s. XVI
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159:Affordable Premium
102:, insurability of
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186:catastrophic
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33:Insurability
32:
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1527:Trade union
1482:Cooperative
1155:Uncertainty
1014:Index-based
982:Multi-peril
940:Reinsurance
899:Public auto
804:Residential
225:beneficiary
206:reinsurance
182:independent
100:real estate
49:uninsurable
18:Uninsurable
1322:by country
1320:Insurance
1294:Total loss
1215:Deductible
1176:Cash value
1120:Act of God
1105:Insurance
1019:Parametric
999:Expatriate
875:Transport/
841:Landlords'
826:Earthquake
714:Whole life
634:Disability
349:(2): 205.
278:References
257:charitable
241:cohabiting
198:flood risk
153:Large Loss
112:marketable
106:means the
69:California
1468:Syndicate
1434:Collegium
1329:Australia
1284:Risk pool
1254:Indemnity
1225:Copayment
1159:Knightian
1071:Terrorism
1041:Liability
909:Satellite
770:Pollution
694:Term life
603:insurance
601:Types of
594:Insurance
553:154448132
351:CiteSeerX
260:donations
84:contracts
1571:Category
1548:Category
1426:§275–277
1344:Pakistan
1192:Pro rata
1081:War risk
1046:No-fault
957:Casualty
914:Shipping
884:Aviation
861:Renters'
856:Property
851:Mortgage
821:Contents
795:Umbrella
755:Fidelity
723:Business
619:Accident
511:Archived
489:1 KB 805
266:See also
184:and non-
88:tontines
76:case law
1473:Benefit
1460:Digesta
1396:History
1130:Actuary
1086:Weather
1076:Tuition
1066:Takaful
994:Deposit
924:Vehicle
208:market.
190:percent
1349:Serbia
1309:Profit
1181:Broker
1107:policy
919:Travel
904:Marine
811:Boiler
785:Surety
629:Dental
611:Health
551:
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373:253729
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108:realty
55:and a
1445:Guild
1339:India
1334:China
1203:Claim
1009:Group
989:Cyber
967:Crime
933:Other
866:Title
831:Flood
549:S2CID
369:JSTOR
227:of a
104:title
80:torts
1418:§234
1140:Risk
1110:and
972:Crop
836:Home
730:Bond
676:Life
451:1965
426:ISBN
392:ISBN
322:ISBN
297:ISBN
98:and
90:and
82:and
42:risk
1112:law
1051:Pet
541:doi
361:doi
110:is
78:of
67:in
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