Why you can’t insure other peoples stuff

Tonight, we’re going to talk about insurable interest, what it means, and why you need it when you’re insuring something.

Occasionally, I will have someone call and ask me to insure something that does not belong to them, or I will find out it doesn’t belong to them through questioning.

It’s not a good idea to attempt to insure something that doesn’t belong to you because most of the time, if there is a claim and it does not belong to you, you’re not going to benefit and here is why.

In order to insure something, or even a person (a person’s life) in the case of life insurance, you need to have insurable interest.
I found a good definition of insurable interest on Wikipedia and I’m going to read that to you real quick:

“Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without repairment 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. Normally insurable interest is established by ownership, possession, or direct relationship.”

Why you can’t insure other peoples stuff

For example, people have insurable interest in their homes and their vehicles but not their neighbors’ homes and vehicles and almost certainly not those of strangers or not even of your cousins or your best friends because you don’t own that stuff.

Now do not get that confused with the fact that you do not own your home because you have not paid it off. There is a contract, there is an agreement, there is paperwork stating that you are purchasing this home, so you do have “insurable interest” or financial interest in losing that home. The same situation applies if you are renting a vehicle or you’re renting a truck. The reason you’re able to insure these things, even though they don’t technically belong to you, is because you do have financial interest in that truck and there is an agreement – there is a contract saying that you have interest in it.

This is why you are able to insure some things that you do not own.

However, I would recommend you don’t insure other people’s stuff.

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