Proving Insurable Interest in Others
Based on the above, whilst we may have insurable interest in our spouses, and of course we have insurable interest in ourselves, we will usually have to prove our interest in insuring any third party.
To have an insurable interest in any third party you must normally possess a financial interest in their wellbeing. It is for this reason that we were unable to obtain life insurance on Bill Gates’ life in the example above.
However, if Mr. Gates were to owe you some money you would have a financial interest in his life for the amount of the loan, and any interest on the loan. Likewise if you entered into a business partnership with him you may be entitled to take out a life insurance policy on your risk in the event that he dies.
Finally, you are also able to obtain a life insurance policy on an individual who is contractually obligated to you in some way – Key Man life insurance would be an example of this type of insurable interest. A company would suffer financially in the event of the loss of a key employee and can consequently purchase life insurance coverage on that individual.