Definition - What does Insurable Interest mean?
Insurable interest refers to the reasonable concern to secure insurance to protect against some form of loss. Thus, a person has an insurable interest in their own life, their family, their property, and their business. Without insurable interest, there is no basis for an insurance policy. Therefore, entities who would not suffer a financial loss as a result of an event would be unable to purchase insurance to cover that event because they do not have an insurable interest.
Insuranceopedia explains Insurable Interest
For example, you can purchase homeowners insurance for a home you own because any destructive event would result in some degree of financial loss. In other words, you have an insurable interest in your house. Similarly, because you do not own your neighbor's home and therefore do not have an insurable interest in their property, you cannot purchase a policy for their home. If you could buy such a policy, it would be in your favor to burn it down in order to collect on the insurance payments, whereas it would not be in your best interests to burn down your own home.