Principle: The principle of Insurable interest is an essential part of every insurance contract and is considered as legal prerequisite for getting insurance.

 Explanation of Principle: Therefore, you can buy a life insurance policy on someone else’s life, provided you have an interest in that person remaining alive, or expect an emotional or financial loss from that person’s death. This is the condition of the life insurance company will look for, that is, if you have a true relationship with the person, you have insured and whether there will be an emotional loss or a financial loss in case that person dies. 

So, a person can take a policy on his own life, his spouse, his children, his parents as he has an Insurable interest in the continuing wellbeing and also stands to face a financial loss in the case of death or if they fall ill. But a person cannot take a life insurance policy in the name of his friend or neighbour as there is no Insurable interest present.