What must an individual possess to benefit from a property insurance policy?

To benefit from a property insurance policy, an individual must possess insurable interest. Insurable interest refers to having a legitimate financial stake in a property, which means the policyholder would suffer a financial loss if the property were damaged or destroyed. This principle is foundational in insurance because it ensures that the insured has a vested interest in protecting the property, thereby reducing the risk of moral hazard where someone may deliberately cause a loss.

For instance, if an individual owns a home, they have an insurable interest in that property, as they would be financially impacted by any loss. Furthermore, insurable interest must exist both at the time of taking out the policy and at the time of making a claim.

While legal title is important in terms of ownership, it is not the sole factor for insurance benefits, as one may have insurable interest without holding legal title, such as in the case of a lessee. Policy confirmation and insurance declarations provide details of the policy but do not establish the foundational requirement of having an insurable interest. Thus, possessing insurable interest is essential for the validity and enforceability of a property insurance policy.