For example, death, old age, fire, marine perils, accident, etc., may occur at any time.
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If there is no insurance;
The person will suffer at the occurrence of these perils, but if insurance is taken against these risks, the ‘usurer will provide a fixed amount or indemnify the amount of loss occurred due to the insured perils.
Thus, insurance is protection against these risks.
Without an insurable interest, it would be wagering, contract. Thus, this principle clearly distinguishes the insurance contract from the gambling.
Insurance and Gambling Distinguished
As an insurance student, it is necessary for us to be able to pinpoint the difference between insurance and wagering. There are:
Insurance contracts are legally valid contracts, whereas, gaming and wagering contracts are void.
Utmost good faith is required to be exercised in insurance contracts, whereas, it is not applicable to gaming or wagering.
In insurance, the insured event may take place or may not, or may take place more than once (except life), but in gaming or wagering the event will definitely take place and it will take place only once.
The principle of insurable interest applies to insurance contracts but not to wagering.
Indemnity applies to insurance, but in case of gaming or wagering the person winning gets back his stake and also a windfall gain.
In insurance, it is known as to which party is immune from loss, but in gaming or wagering it is not known which party is going to win or lose.
An insurance event is never desired by either of the parties, but parties to gaming and wagering would always like to win at the cost of the other.