What is meant by 'insurable interest' in property insurance as per Idaho regulations?

Insurable interest in property insurance, according to Idaho regulations, refers to an actual, lawful, and substantial economic interest in the property. This means that the policyholder must have a legitimate financial stake in the property being insured. If the property were damaged or destroyed, the policyholder would suffer a financial loss, which is essential for the insurance contract to be valid.

This concept is fundamental in insurance because it prevents moral hazard, where individuals might claim insurance benefits on property for which they have no real investment. Without insurable interest, a person might have an incentive to cause damage to the property, knowing they would benefit financially from a claim. Therefore, establishing that the insured party has a significant economic relationship with the property is crucial in the context of risk management and underwriting in insurance.