Insurable Interest 可保權益
When a life policy is taken out, the policy owner must have a legally recognised insurable interest in the life insured. Without it the policy is void and cannot be enforced. The requirement separates insurance from gambling and reduces the moral hazard of someone profiting from harm to the life insured.
Everyone has an unlimited insurable interest in their own life and in the life of their spouse. Under section 64A of the Insurance Ordinance (Cap. 41), the parent or legal guardian of a minor (a person under 18) also has an insurable interest in the minor's life. Beyond these cases, family ties alone (such as between siblings) or friendship are generally not enough; there must be a real financial stake.
Business and financial relationships can also create an insurable interest, but its amount is limited by the financial loss involved. A creditor's interest is limited to the debt, and an employer's interest in a key employee is limited to the financial loss the employee's death could cause.
Life insurance requires insurable interest only at inception, so a later divorce, repayment of a debt or end of employment does not affect the policy. A beneficiary or an assignee of a life policy does not need an insurable interest in the life insured. This is a common exam point.
Duty of Disclosure 披露責任（或稱申報實情責任）
An insurance contract is a contract of utmost good faith. It differs from the caveat emptor rule in ordinary sales because facts such as the life insured's health and habits are known mainly to the applicant's side. The proposer and life insured must volunteer all material facts they know, even if the proposal form does not ask about them directly. The insurer must also act in utmost good faith, for example by not misleading the customer.
A material fact is one that would influence a prudent underwriter in deciding whether to accept the risk and on what terms. Examples include health, medical history, occupation, dangerous hobbies, smoking habits, family medical history, and any previous refusal or extra premium charged by another insurer.
The duty continues until the contract is concluded, so new developments after the proposal is submitted but before the insurer accepts it must also be disclosed. Once the policy is in force, a decline in the life insured's health generally need not be reported, but disclosure is required again when applying to reinstate a lapsed policy. Matters that generally need not be disclosed include facts unknown to the applicant's side, facts that reduce the risk, facts the insurer knows or ought to know, and information the insurer has said it does not need.
Non-disclosure is leaving out a fact that should have been disclosed, while misrepresentation is making an incorrect statement. Where a material fact is involved, the contract is voidable at the insurer's option rather than automatically void. In a case of fraud, the insurer generally need not return the premiums. However, long term policies commonly contain an incontestable clause: once the policy has been in force for a stated period, usually two years, the insurer can no longer challenge its validity on this ground except in cases such as fraud listed in the clause. Intermediaries should explain the duty to customers and must never advise them to withhold information.
Other Insurance Principles 其他保險原則
Indemnity: life insurance is not a contract of indemnity. A life cannot be valued precisely in money, so the insurer pays a pre-agreed sum when the insured event occurs rather than measuring the actual loss. Insurable interest may limit the amount insured, but it is considered only at inception, and no loss has to be proved at claim stage.
Contribution and subrogation: these principles flow from indemnity and generally do not apply to life insurance. One life insured may have several policies, and each insurer must pay in full under its own policy rather than sharing the claim proportionately. If the life insured dies through a third party's negligence, the insurer cannot pursue that party by subrogation after paying. The estate or family can still claim against the third party as the law allows.
Proximate cause: this principle still applies to life insurance, especially to benefits limited to particular causes, such as accidental death benefits. A basic death benefit is generally payable unless the cause is excluded, such as suicide within a period stated in the policy, so disputes over cause are less common.
Look at the nature of each benefit. Some hospital expense benefits attached to life policies pay according to actual costs and are indemnity in nature, so the life insured cannot recover more than the actual expenses. The principles that apply should therefore be judged benefit by benefit.
Practice
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