What constitutes 'insurable interest' in property insurance?

Insurable interest in property insurance refers to a lawful economic interest in the property being insured. This concept is fundamental in insurance principles, as it establishes that the policyholder will suffer a financial loss if the property is damaged or destroyed. For an insurance contract to be valid, the insured must have a stake in the property, whether through ownership, a mortgage, or a financial agreement that could be adversely affected by a loss.

Having a lawful economic interest means that the policyholder stands to benefit from the protection provided by the insurance policy. Should a loss occur, the insured would face financial repercussions, thus justifying the need for coverage. In contrast, emotional attachment or mere verbal agreements do not establish a legal basis for evaluating risks and losses in an insurance context, and ownership alone, while important, does not encompass all possible forms of insurable interest available.