In general, no particular amount of insurable interest is necessary to make the insurance con tract valid. It is enough if at the time of ef fecting the insurance policy the insured has some interest in the life or property insured. is, however, one exception in the case of life insurance. Although in the ease of insur ance of the life of a relative the law does not require any limit to be placed on the value of the life insured, when the interest of the insured is purely financial, the insurance by a creditor of the life of a deutor, the amount of the insurance must bear some relation to the amount of the debt plus interest and the cost of insur ance or it will he deemed void as a gambling contract.
One of the most important principles of the law of insurances is that the contract of insur ance is a contract of indemnity only. It follows that in most forms of insurances the insurer must not only have an insurable interest at the time he effects the insurance, but that lie must have an insurable interest at the time of the loss in order to recover on the policy, and the amount of the recovery will be measured by the amount of his insurable interest. The life insurance con tract constitutes an exception to the rule. It is not strictly a contract of indemnity, but a con tract to pay a fixed amount of money; and if the insured has an insurable interest at the time of effecting the insurance, so that the policy is then valid, he may recover the entire amount of the policy upon the happening of the loss even though the insurable interest has then ceased. Insurance policies. known as 'valued policies,' are sometimes written in which an agreed value is assigned to the interest of the insured. In the event of loss the insured must still have his interest in the property insured. but the value of his interest is determined by the policy. In sev eral States insurers against loss by fire are re quired by statute to issue only valued policies.
When there are several insurers of the same interest in the same property. their position in the event of loss is not unlike that of co-sureties. If the amount of the several policies exceeds the value of the interest, the insured may not re cover the full amount of property from the in surer, but each is required to ratably to the loss: or, if the insured elects to recover the amount of the loss from any insurer as he may do in the absence of stipulation to the contrary in the policy), that one, on pay ment of the loss, may compel contribution pro rata by each of the other insurers.
In the case of marine insurance policies the insured. is deemed to be a co-insurer with his insurer if the amount of insurance is less than the full value of the interest insured. The ma rine policy is therefore a policy of indemnity only if the property or interest insured is insured for its full value. If insured for less than its full value, the insured can recover on his policy only such proportion of the amount insured as the loss bears to the value of the whole interest of the insurance un the property.
The amount stated on the face of the policy is the maximum amount for which an insurance company may become liable. In some forms of insurance. as in life, accident, and sickness in surance, the amount stated in the policy is the amount actually paid if the specified event is curs, regardless of whether an equivalent loss is actually suffered or not. With most forms of insurance of property the situation is different. Whatever may be the face of the policy, the indemnity is not expected to exceed the loss ac tually experienced. If insured property is par tially destroyed and the loss dues not exceed the amount of the insurance, the amount of loss fixes the maximum amount to be paid as indem nity. In some countries in fire insurance any person who insures his property for less than its full value is held to be his omit insurer for the difference between the value of the property and the amount of the insurance; and if the prop erty is partially destroyed, and the loss does not exceed the insurance, the indemnity actually paid is such part of the loss as the total amount 'of insurance in force is of the total value of the property. If, for example, property insured for three-fourths of its value is partially destroyed. the indemnity actually paid will be three-fourths of the loss. The rest of the loss will fall upon the insured as co-insurer. In the United states this principle is not commonly applied except in marine insurance. ln general, when insured property is partially destroyed and the loss does not exceed the amount of the insurance, the in surance company become responsible for the entire amount of the loss.