What is required for a policy to be considered valid in terms of "insurable interest"?

A policy is deemed valid in terms of "insurable interest" when the policyholder has a financial or emotional stake in the item or individual being insured. Insurable interest is a fundamental concept in insurance that requires the policyholder to have a legitimate interest in the preservation of the subject matter of the insurance. This ensures that the insured person or entity stands to suffer a loss if the insured event occurs, which helps to prevent insurance fraud and moral hazard, as it creates a legitimate incentive for the policyholder to prevent loss or damage.

Ownership of the insured property can indeed confer insurable interest, but it is not the only form of potential interest. Emotional bonds, such as those between family members, can also satisfy the requirements of insurable interest. Thus, having a financial or emotional stake encompasses a broader range of valid situations than mere ownership, making it a more inclusive and comprehensive explanation of the principle.

Prior claims history and governmental endorsements do not play a role in determining insurable interest. They pertain to underwriting criteria or regulatory considerations rather than the foundational requirement of having a legitimate interest in the insured risk.