Insurable Interest

Insurable Interest refers to the legally recognized economic interest relationship that the applicant or the insured has with the subject matter of insurance. In foreign trade, it means that the insured will suffer economic loss due to damage to the goods, or gain benefit from the safety of the goods. Its usage scenarios are mainly concentrated in marine, air, and multimodal transport cargo insurance, especially under terms such as CIF and CIP where the seller arranges insurance; the seller must ensure that it has an insurable interest in the goods, otherwise the insurance contract may be invalid. Precautions include: insurable interest must exist at the time of loss, not at the time of application; the attribution of insurable interest differs under different trade terms, such as under FOB and CFR where the buyer bears the risk, the buyer must arrange insurance itself and has the insurable interest; easily confused with 'insurable interest' is 'Rights under Policy', which refers to the right to claim under the policy and is transferable, whereas insurable interest is not transferable. In addition, banks in letter of credit transactions usually require the policy to show that the insured has an insurable interest in the goods.