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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
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Life Policies: definitions: 'insurable interest'

An individual has an insurable interest if they were likely to lose money or incur a liability as a result of the death of the life assured (IHTM20081).

Under the Life Assurance Act 1774 a contract of insurance may be avoided as between the insurance company and the person effecting the policy if that person had no insurable interest in the life of the life assured. But if the insurance company pays out under the policy the payment must be treated as made in respect of the policy - see Worthington v Curtis [1875] 1 Ch D 419. Lack of an insurable interest is therefore no bar to a claim for Inheritance Tax in such circumstances.