“Insurable interest” in the context of life insurance and living benefits is a fundamental legal and financial principle requiring the policyholder to have a legitimate stake in the welfare of the person insured. This stake could be based on family or financial relationships, where the policyholder would suffer a direct loss or hardship if the insured individual were to experience harm, illness, or death. In Quebec, the Civil Code also recognizes a moral interest in another person’s life and health.
For life insurance, insurable interest must exist at the start of the contract. Under the provincial insurance acts and the Civil Code of Québec, you have an insurable interest in your own life and in the lives of your spouse, your children and grandchildren, a person you depend on for support or education, your employees, and anyone in whose life you have a financial interest, such as a business partner. Without an insurable interest, an individual contract is void unless the person insured consents in writing.
In the realm of health insurance and living benefits, insurable interest is similarly grounded in the relationship between the policyholder and the insured, ensuring that coverage is purchased out of a genuine concern for the insured’s health and well-being. This principle supports the ethical foundation of health-related insurance, ensuring that policies are taken out to provide for medical care and support in times of need, rather than for potential financial gain from another’s illness or injury.
The concept of insurable interest is integral to the insurance process, as it legitimizes the insurance contract, aligns it with moral and ethical standards, and safeguards against speculative and fraudulent practices.