Is it true that only parties with insurable interest can insure property or a person?

The statement is true because insurable interest is a fundamental principle of insurance. This principle requires that an individual or entity must have a legitimate interest in the property or person being insured in order to take out an insurance policy. Without insurable interest, the insurance contract may be deemed void or unenforceable.

In practical terms, this means that an individual cannot insure someone else's property or life unless they would suffer a financial loss or hardship if that property were damaged or that person were harmed. This requirement helps to prevent moral hazard and ensures that insurance serves its primary purpose of risk management rather than being a tool for speculative gain.

Therefore, only parties with a genuine stake in the outcome—those who would incur a loss upon damage or loss of the insured property or individual—are eligible to insure them. This principle not only upholds the ethical framework of insurance but also maintains its intended economic function.