Which term relates to the insurable interest concept?

The concept of insurable interest is fundamentally connected to the principle of indemnity. Indemnity refers to the obligation of an insurance company to compensate the insured for a loss, ensuring that the insured is made whole again after a loss occurs. This principle supports the requirement that the insured must have a valid interest in the subject matter of the insurance claim, meaning they would suffer a financial loss if that subject were damaged or destroyed.

When insurable interest is present, it confirms that the policyholder stands to gain from the preservation of the insured item or faces a loss from its damage, thereby justifying the need for insurance coverage. This ensures that individuals do not profit from insurance claims, which aligns with the overall goal of the indemnity principle to prevent moral hazard.

The other terms, while related to insurance concepts broadly, do not directly connect to insurable interest in the same way. For example, subrogation involves the insurer's right to pursue recovery from a third party after making a payment to the insured, liability refers to legal responsibility for causing damage or harm, and depreciation pertains to the reduction in value of an asset over time. However, none of these concepts inherently imply the necessity of having an insurable interest like indemnity does.