What is the main principle of insurable interest?

The main principle of insurable interest is that the policyholder must have a financial stake in the subject of the insurance. This fundamental concept ensures that the insured party stands to suffer a genuine financial loss as a result of damage, destruction, or loss of the insured item or entity. This principle helps prevent moral hazard, where an individual might act carelessly because they do not have a vested interest in the property or individual being insured. By requiring insurable interest, insurance companies can maintain the integrity of their contracts and only indemnify those who would face actual financial hardship if a loss occurs.

In the context of the other options, while providing evidence of loss is related to the claims process, it does not capture the essence of insurable interest. The requirement to belong to the insurance company or disclose personal information is not relevant to the concept of insurable interest; these aspects relate more to enrollment and underwriting procedures rather than the underlying principle that safeguards the insurance system.