This is borne out in terms of the premium to be paid. The higher the risk, the higher the premiums. A peril is a potential cause of loss, such as fire or theft. A hazard is a state of affairs which may increase the risk arising from a particular peril. 3.2 Insurable interest.
Insurable interest is a fundamental requirement of a valid insurance contract.
The insured must derive some specific advantage from the subject matter of the insurance contract. By this it is meant that the insured will be financially worse off as a result of any loss or damage to subject matter of the contract. The following must be met in order for there to be an insurable interest. The insured must stand in a legally recognised relationship to the subject matter. The insurable interest must exist both at the time of entering into the contract of insurance and when the loss occurs.