The correct answer is: B. Insurable interest.
Gambling is a form of wagering where the outcome is uncertain and the participants risk losing money. Insurance, on the other hand, is a form of risk management where the insured party pays a premium to the insurer in exchange for protection against a specific loss.
One of the key differences between gambling and insurance is the presence of insurable interest. Insurable interest is a legal concept that requires the insured party to have a financial stake in the outcome of the event being insured. This means that the insured party must stand to lose something if the event occurs.
For example, if you own a house, you have an insurable interest in that house. If your house burns down, you will suffer a financial loss. Therefore, you can purchase insurance to protect yourself from that loss.
However, if you do not own a house, you do not have an insurable interest in that house. If your neighbor’s house burns down, you will not suffer a financial loss. Therefore, you cannot purchase insurance to protect yourself from that loss.
The principle of insurable interest helps to ensure that insurance is not used for gambling purposes. If there were no insurable interest requirement, people could purchase insurance on events that they had no financial stake in. This would create a moral hazard, as people would be more likely to take risks if they knew that they were insured against the loss.
The other options are not correct because they do not address the issue of insurable interest.
- Principle of utmost good faith is a legal principle that requires both parties to an insurance contract to act honestly and in good faith. This means that the insured party must disclose all material facts to the insurer, and the insurer must act in the best interests of the insured party.
- Indemnity principle is a legal principle that requires the insurer to restore the insured party to the same financial position they were in before the loss occurred. This means that the insurer cannot pay out more than the insured party has lost.
- None of the above is not a correct answer because it does not address the issue of insurable interest.