"If there is no insurable interest, the insurance contract becomes wagering contract, and therefore illegal, null and void". Elucidate the statement with reference to the principle on the life of other relations.

The Insurance Act 1938 does not define the insurable interest but it has been defined by Mac-Gillivray as follows: "Where the assured is so situated that the happening of the event on which the Insurance money is to become payable would as a proximity cause involve the assured in the loss or diminution or any right recognised by law or in any legal liability there is an insurable interest in the happening of that event to the extent of the possible loss or liability. The object of Insurance should be lawful for this purpose; the person proposing for Insurance must have interest in the continued title of the insured & would suffer pecuniary loss if the insured dies. If there is no insurable interest, the contract becomes wagering (gambling) contract. All wagering contracts are illegal & therefore null & void. An individual has unlimited insurable interest in own life policy. So long as the Insurance is on one's own life, the "Insurance interest" presents no difficulty. A person has insurable interest in his own life to an unlimited extent. Hence no limit may be fixed in respect of life Insurance he may effect. Where, however, insurer rejects a proposal for an amount of assurance, which is disproportionate to the means or the proposer. it is not normally for lack of Insurable interest but on considerations or "moral hazard", Indeed it may also be presumed in a case where a person proposes for a policy for a large amount, which he may' not be able to maintain having regard to his income, that it will be financed by some other person and that there is no insurable interest. On the other hand, insurance on the Life of Spouse is also valid. As a wife is normally supported by her husband, she can validly affect insurance on her life for adequate amount. Insurable Interest is also said to exist on the Insurance taken on the Life of Parent and Child. Insurable Interest on the life of Other Relations must be justified. In the case of other relations, insurable interest cannot be presumed from the mere existence of their relationship. Moral obligations or duties are not sufficient to sustain an insurable interest. In every other case, the insurable interest must be a pecuniary interest and must be founded on a right or obligation capable of being enforced by Courts of law. The following are illustrations of such cases of insurable interest: Employer - Employee Creditor - Debtor Partner Surety and principal debtor-Co-surety Effect on Contract when Insurable interest is not present: Where, therefore, the proposal is on the life of another, unless the proposer has insurable interest in the life to be assured, the contract shall be void. Lack of insurable interest is a defence, which the insurer may plead in resisting a claim. There may be also cases where Insurance on one's own life is surreptitiously financed and held by another for his benefit which if detected by the insurer, may be declared void. As a life Insurance contract is not one of indemnity, the existence of insurable interest and the amount thereof will have to be considered at the time or effecting the contract since lack of such interest would render the contract void. If insurable interest existed at the inception or the policy the contract would be enforceable though such interest might ceases later.