Insurable Interest

I was driving the other day with the radio on and an ad came on for an insurance broker. The broker, who shall remain nameless, insures hard to insure drivers. You know, tickets, DUIs, accidents, young drivers, etc.... The ad went like this: "We can insure anybody. Tickets? No problem. DUIs? No problem. Accidents? No problem. The car is not in your name? No problem."

Um, problem. There is this little concept of insurable interest. What is insurable interest? Insurable interest means that you have an interest in what you are insuring. Insurance is not gambling. Okay, this is a complicated concept. So, a few examples.

Lets say I know a 16 year old who just got her driver's license. And, she is a bit accident prone. You know the type - she walks into walls or falls down while walking. Now, I know she is going to get in an accident. Its just bound to happen. According to this broker, I could take out insurance on her car. When she gets in an accident, I would collect on the insurance on the policy I took out on her car. That is called gambling - not insurance.

The basic rule is simple: you cannot insure a car if you do not own it. If you don't own a car, you can take out a driver's policy that will cover you if you drive someone else's car.