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Terminology

A Quick guide to insurance terminology


I
Indemnity

This is the basis of most insurance policies. It is the benefit you receive that place you, as far as possible, in the same financial position that you were in before the loss occurred. The insurer has an option to repair, reinstate, replace, or pay cash. Different policies will have different cover options to indemnify you for your loss and the basis on which your insurer will indemnify you.




Insurable interest

You have an insurable interest in property if you will gain a financial benefit from the protection of that property being insured, or if you could suffer a financial disadvantage should the property insured be lost, damaged, or, in the case of personal injury insurance, where an insured person is injured. Generally, an insurable interest is established by ownership, legal possession, or a direct relationship.

Insurers may stipulate specific policy provisions requiring you to prove insurable interest at the underwriting or claims stage, for example, having to demonstrate ownership of a vehicle, etc.

Example:

A father can insure his son’s or his wife’s vehicle under an insurance policy in his name, if he has an insurable interest in the vehicle in that he pays the credit agreement, even though he may not be the driver of the vehicle.