You can’t just buy an insurance policy for yourself or someone who is dependent on you. You have to first prove the insurable interest. If you can’t prove the insurable interest then the insurance company won’t allow you to buy an insurance policy. In this article, we are going to discuss what is an insurable interest and the types of coverage you can buy to protect it. Insurable interest is the basic requirement when you are trying to purchase any insurance policy. So it is very important to understand what insurable interest is.
Definition:
When you are trying to buy an insurance policy the first thing you have to do is to prove the insurable interest behind the purchase. Why do you need the insurance policy? And what kind of problem or adversity you will face if you don’t insure? You can buy an insurance policy for a person, property, or a selective item. But before you buy a policy first you have to prove it to the insurance company that how hard it will be for you to compensate for the loss.
You do insurance for the people or items where you think that it will serve you for a longer period. They are like an investment to you and if you lose them it will be very hard for you to bring it back to the same position. So in businesses the company wants to ensure the items and people who they think are very important for their growth. Because in the future anything can happen. So it is better to prepare yourself as early as you can.
Types of insurance to protect a business
You want to protect the key resources that are important for the growth of your company. For these, there are different types of insurance policies available in the insurance sector. They are:
#1. Property insurance:
In business, many types of risk can harm you. So, the insurable interest here is to protect you from these potential threats you should buy property insurance. This will give you protection if there is any damage to the equipment, furniture, and inventory. There is always a risk of theft, earthquakes, and floods during the rainy season. So to protect you from these situations there is property insurance.
Read Also: Complete Guide to What Is Property Insurance And its Benefits!
To get the property insurance you have to first show to the insurance company that you are the owner of the company. By seeing the property papers the insurance company will issue you the policy. If the company has more than one owner then both of the owners must sign the insurance policy paper to give it validated.
#2. Life insurance:
Every company has some key employees. Without them, it becomes very hard to manage it. The key employees play a valuable role in the growth of the company. For this sometimes the company buys life insurance policy in the name of the key employee. Because a sudden demise of the employee can put the company in a complicated situation. This insurance is a key person life insurance.
To get this insurance policy first you have to show it to the insurance company how important the employee is to your organization. Because you can’t buy a life insurance policy in other names. So if you can satisfy the insurance company that the employee means a lot to your company the insurance company permits to buy a life insurance policy in the name of the employee. It provides your company with the necessary resources so that you can regroup yourself if you lose him.
#3. Auto Insurance:
If your company is in the transport sector there will be a lot of vehicles. So, if there is an accident where your vehicle is responsible then you have to face the consequences. So, the insurable interest here is to protect yourself you should consider buying an auto insurance policy. It will cover you if something happens. So to buy the insurance policy first you have to show the papers of the vehicle to the insurance company that the vehicle belongs to you.
By seeing the original documents of the vehicle the insurance company will allow you to purchase the auto insurance policy.
Worker’ compensation:
If your business has machinery you should consider buying a Worker Compensation Insurance policy. Insurable interest present here is that if someone from the employee gets hurt while performing his duty this insurance policy will help to cover the medical cost. Or incase if he dies the policy will give a lump sum of money to the family of the employee. Buying this policy is very important if you are running a business. A small slip and fall can lead to serious injuries. So it is a must for a company whether or not it involves risk.
So to buy this policy first you have to prove to the insurance company that you are the owner of the company. By checking the documents the insurance company will allow you to buy the insurance policy.
Product liability:
If your company is a manufacturing company you should have product liability insurance. No matter how much protection you take to make your product perfect a small mistake can ruin the reputation of your product.
Read Also: What is Liability Insurance and benefits of Liability Insurance
The product liability insurance helps you to compensate in this kind of situation. It also covers the legal costs if the customers sue you.
When you are buying Life Insurance for Family
The same thing applies when you are trying to purchase a life insurance policy for someone you know. Like if you are the grandfather or the grandmother of a child and you want to buy a life insurance policy in his name you have to show that they are dependent on you. The same applies to when you are trying to purchase a policy for your stepson or stepdaughter. You have to show proof that they are financially dependent on you.
Final Words
So I hope it is clear to you that first, you have to show the insurable interest before buying an insurance policy. Without insurable interest, the insurance company won’t allow you to buy an insurance policy. You can consult with your insurance advisor. He will give you a clear idea about it. If you like this article share it. For further information comment in our comment box below.
