Insurable Interest: The insured
must have an insurable interest in the
subject matter of insurance. One
fundamental fact of this principle is
that ‘it is not the house, ship,
machinery, potential liability of life that
is insured, but it is the pecuniary
interest of the insured in them, which
is insured.’ Insurable interest means
some pecuniary interest in the subject
matter of the insurance contract. The
insured must have an interest in the
preservation of the thing or life insured,
so that he/she will suffer financially on
the happening of the event against
which he/she is insured. In case of
insurance of property, insurable
interest of the insured in the subject
matter of the insurance must exist at
the time of happening of the event. In
order to name insurable interest
however, it is not necessary that one
should be the owner of the property.
For example, a trustee holding
property on behalf of others has an
insurable interest in the property.
Indemnity: All insurance
contracts of fire or marine insurance
are contracts of indemnity. According
to it, the insurer undertakes to put the
insured, in the event of loss, in the same
position that he occupied immediately
before the happening of the event
insured against. In other words the
insurer undertakes to compensate the
insured for the loss caused to him/her
due to damage or destruction of
property insured. The compensation
payable and the loss suffered are to be
measured in terms of money. The
principle of indemnity is not applicable
to life insurance.