Moshi Co-Operative University

MOSHI CO-OPERATIVE UNIVERSITY

(MoCU)

FACULTY : FBIS

PROGRAMME : BSC-BICT 3

COURSE NAME : BUSINESS LAW

COURSE ANTE : MAL 336

TASK : GROUP ASSIGNMENT

COURSE INSTRUCTOR : BWIRE (MS V)

MEMBERS

EDGAR AIDAN KOMBA……………………………………...FBIS/BICT/055/13

GLORIA NDAKIDEMI………………………………………...FBIS/BICT/063/13

MATOKEO MSAVANGE……………………………………...FBIS/BICT/

RIDHIWANI J CHURI………………………………………....FBIS/BICT/087/13

VERONICA NDELEMBA……………………………………...FBIS/BICT/089/13

AMANI YASIN AMANI………………………………………..FBIS/BICT/045/13

QUESTION

What social forces are affected by imposing the requirements of insurable interest?

Insurable interest

It is legal right to insure something arising out of a financial relationship recognized under the law between the insured and the subject matter of insurance.

Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without impairment or damage, of the insured object or in the case of a person, their continued survival. A person has an insurable interest in something when loss of or damage to that thing would cause the person to suffer a financial or other kind of loss.

Typically, insurable interest is established by ownership, possession, or direct relationship. For example, people have insurable interests in their own homes and vehicles, but not in their neighbors' homes and vehicles, and certainly not those of strangers.

Requirement of insurable interest

1. There must be some property, right, interest, life or potential liability capable of being insured in monetary value.

2. The insured must have ownership or stand in a legal relationship with the subject matter for the insurance.

3 The insured must demonstrate that she or he benefits from its safety, well-being or freedom from liability and would be adversely affected by its loss due to damage or any existence of liability. Typically, insurable interest is established by ownership, possession, or direct relationship. For example, people have insurable interests in their own vehicles and businesses, but not other persons’ vehicles and business.

The following are social forces which are affected by imposing the requirements of insurable interest:
Blood relatives

A parent usually is deemed to have an insurable interest in his or her child’s life. A child usually is deemed to have an insurable interest in his or her parent’s life. But once the child becomes a financially independent adult, it is not certain that all courts would hold that the blood relationship alone would be sufficient to meet insurable interest tests.
A grandchild usually is deemed to have an insurable interest in the life of a grandparent. A grandparent usually is deemed to have an insurable interest in the life of a grandchild.
Siblings usually are deemed to have an insurable interest in the life or lives of brothers and sisters.
Other relatives, such as an aunt, uncle, niece, nephew, or cousin, generally are not deemed to have an insurable interest merely by virtue of their blood relationship but may have an insurable interest arising out of a business or financial transaction or out of financial dependency on the insured.
Marriage
Spouses have an insurable interest on each other’s lives. A few courts have held that a person engaged to another has an insurable interest in the other’s life.
Other individuals related to the insured by marriage are usually deemed not to have an insurable interest based solely on a marriage relationship (but may have an insurable interest based on financial dependency). In-laws, for example, or step-sons or daughters, or foster children have no per se insurable interest based on family relationships but can obtain insurable interest because of dependency.
Business
A person (or business or financial enterprise) that would suffer a financial loss at the insured’s death will usually be deemed to have an insurable interest This means an employer can insure an employee, an employee can insure an employer, a partner can insure a partner, and a partnership can insure its partners, a surety can insure the life of his principal, and a member of a commercial enterprise can insure an individual if that person’s death would adversely affect the financial stability or profits of the enterprise. (Although a business generally has an insurable interest in the lives of officers, directors, and managers, or others on whose continued life or lives the business’ success may depend upon, a corporation may not have insurable interest in the life of a shareholder who has no working or other financial relationship with the business. Where business associates have insured each other to fund a purchase of the business interest at the insured’s death or the business itself has insured an owner to fund a purchase of that person’s interest at death, usually there will be an insurable interest.

Reference

Kimball-Stanley A. (2008). Insurance and Credit Default Swaps: Should Like Things Be Treated Alike. CONNECTICUT INSURANCE LAW JOURNAL.