Insurable Interest Arising Out of Ties of Affection, Blood or Marriage

The courts have generally held that certain ties of near relationship create an insurable interest, even though the element of dependence is not present. Thus, according to the weight of authority, a parent has an insurable interest in the life of a child even though the same be permanently disabled. The relationship of husband and wife is also conclusively presumed in nearly all cases to establish an insurable interest on behalf of either party in the other's life.

As regards other relationships, however, the courts have generally taken the position that the interest must be based upon a reasonable expectation of deriving pecuniary benefit from the continuance of the insured's life. On this theory American courts have repeatedly held, for example, that a woman has an insurable interest in the life of her fiance, since that relationship gives to her a reasonable right to expect pecuniary benefit. An excellent review of the numerous decisions referring to insurable interest arising out of ties of blood or affection is furnished by the Circuit Court of Appeals. Following a review of the decisions bearing' on the subject the court held:

The sum of the decisions and of text-book discussions upon the subject of insurable interest may, we think, be fairly stated thus: No person has an insurable interest in the life of another unless he would in reasonable probability suffer a pecuniary loss, or fail to make a pecuniary gain, by the other's death; or (in some jurisdictions) unless, in the discharge of .some undertaking, he has spent money, or is about to spend money, for the other's support or advantage. The extent of the insurable interest the amount for which a policy may be taken out, or for which recovery may be had is not now under consideration. What is often called "relationship insurance" must be governed by this rule. It must rest upon the foundation of a pecuniary interest, although the interest may be contingent, and need not be capable of exact estimation in dollars and cents. Sentiment or affection is not sufficient of itself, although it may often be influential in persuading a court or jury to reach the conclusion that a beneficiary had a reasonable expectation of pecuniary advantage from the continued life of the insured. In one relation only the relation of husband and wife is the actual existence of such a pecuniary interest unimportant; the reason being that a real pecuniary interest is found in so great a majority of cases that the courts conclusively presume it to exist in every case, whatever the fact may be, and therefore will not inquire into the true state of a few exceptional instances. This, we think, is essentially what is meant by the declaration of courts and textbook writers that the mere relationship of husband and wife is sufficient to give an insurable interest. . . .

In all other relationships there is no presumption of interest, and no insurable interest exists unless the reasonable likelihood of pecuniary loss or gain is present in actual fact. No doubt, judicial language is to be found supporting the view that the mere relationship of parent and child is sufficient to give an insurable interest.