Insurable interest is the legal requirement that the policyowner would suffer a financial loss or other recognized detriment upon the insured's death. At policy inception, most jurisdictions require insurable interest for individual policies-spouses, close family, business partners, creditors, or entities with a lawful, substantial interest. The doctrine prevents wagering on human life and supports public policy. Once a policy is validly issued, many states allow subsequent assignment regardless of insurable interest.

Agents document relationships and financial ties at application to establish insurable interest. In business cases, corporate resolutions or buy-sell agreements support the need and amount of coverage.