General Insurance PrinciplesQuestion 180 of 474
A bank holds the mortgage on a house and the owner's adult son lives there rent free. Insurable interest in the dwelling is held by:
a.the bank alone, since it advanced the money that bought it
b.the owner and the bank, each to the extent of a financial stake
c.the owner and the son, because both live in the same dwelling
d.any party named on the policy, whether or not money is at risk
Explanation
Insurable interest means suffering a genuine financial loss if the property is damaged, so the owner holds it in the equity and the mortgagee holds it up to the unpaid loan balance. In property insurance that interest must exist at the time of loss. Simply living in a house creates no financial stake, and being named on a policy does not manufacture an interest that was never there.
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