What does the principle of insurable interest require?

The principle of insurable interest is fundamental in insurance as it ensures that the policyholder has a legitimate stake in the subject of the insurance. This means that the insured person or entity must experience a potential loss if the insured event occurs, such as a loss of property or a person's life. This requirement serves to prevent insurance policies from being taken out for speculative purposes, which could lead to moral hazards where the insured might intentionally cause a loss to gain from the insurance.

In practice, having insurable interest means that individuals are typically insurable for their own properties, businesses, or the lives of those to whom they have a close relationship. This ensures that the insurance serves its intended purpose of providing protection against financial loss that one would suffer, thus maintaining the integrity of the insurance system.

The other options do not accurately reflect the necessity of insurable interest, which focuses primarily on the connection between the insured and the subject of insurance rather than equality among all individuals insured, limits to personal belongings, or the insurer’s interest in the insured's wellbeing.