What does the principle of insurable interest require?

The principle of insurable interest requires that the insured must have a legitimate stake in the insured item or person. This means that the individual or entity purchasing the insurance must stand to suffer a financial loss if the insured item is damaged or lost, or if the insured person suffers a loss. Insurable interest is a fundamental concept in insurance that ensures that insurance policies are not used for speculative or gambling purposes.

When someone has a legitimate interest in the insured object or person, it ensures that there is a valid reason for them to seek insurance, which supports the ethical foundation of insurance contracts. Without insurable interest, the purpose and function of insurance would be undermined, as it could encourage fraudulent claims or irresponsible behavior.

The other options do not capture the essential requirement of insurable interest. For instance, ownership of the policy is generally a separate concept from having an insurable interest. Financial independence is unrelated to the principle of insurable interest, and active management of property does not necessarily signify a stake in the property that would create a valid insurance claim.