In which situation would one not have an insurable interest?

Insurable interest is a fundamental principle in insurance that requires the policyholder to have a legitimate interest in the subject of the insurance policy, often meaning that they would suffer a financial loss if the insured object is damaged or lost.

In the situation where a person insures their neighbor's car without the neighbor's consent, they lack an insurable interest. This is because they do not have any legal or financial stake in that vehicle. Simply put, if the neighbor's car were to be damaged or destroyed, the individual who took out the insurance policy would not incur any loss or expense related to that vehicle. The legal relationship required for an insurable interest is absent, as the person who took out the insurance claim does not own the car nor stand to lose anything from its damage or destruction.

In contrast, borrowing a friend's car indicates a temporary responsibility for the car's well-being; owning a house directly ties the owner to a financial stake in that property; and leasing office space creates a commitment by the business to the leased property, demonstrating an interest in its preservation. Each of these scenarios fulfills the requirements for insurable interest, as there is a concrete potential for financial loss tied to the respective property.